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entitled 'Intellectual Property: U.S. Trade Policy Guidance on WTO 
Declaration on Access to Medicines May Need Clarification' which was 
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Report to Congressional Requesters: 

United States Government Accountability Office: 

GAO: 

September 2007: 

Intellectual Property: 

U.S. Trade Policy Guidance on WTO Declaration on Access to Medicines 
May Need Clarification: 

Intellectual Property: 

GAO-07-1198: 

GAO Highlights: 

Highlights of GAO-07-1198, a report to congressional requestors. 

Why GAO Did This Study: 

The WTO Agreement on Trade-Related Intellectual Property (TRIPS) 
requires all 151 World Trade Organization (WTO) members to provide 
baseline protections, including 20-year patents for innovative 
pharmaceuticals. The Trade Act of 2002 granting Trade Promotion 
Authority (TPA) to the President outlined three negotiating objectives 
related to intellectual property (IP). The first two aim to strengthen 
IP rights and enforcement abroad. The third calls for respect of the 
WTO Doha Declaration on TRIPS and Public Health, which addresses access 
by developing countries to patented medicines, particularly in epidemic 
and emergency situations. 

This report (1) describes the Declaration and its interpretation by the 
United States and other nations; (2) analyzes how USTR has balanced 
respect for the Doha Declaration with the other two IP objectives in 
negotiating free trade agreements; and (3) evaluates the extent of 
public health input by agencies and the private sector. We reviewed 
official WTO and U.S. government documents, interviewed U.S. and 
foreign government officials, and obtained private sector views. 

What GAO Found: 

The 2001 Doha Declaration on TRIPS and Public Health was adopted by WTO 
members to stress the importance of implementing the TRIPS Agreement in 
a manner supportive of public health. The U.S. interprets the 
Declaration as a political statement that recognizes the severity of 
public health crises while affirming the importance of IP protection. 
It maintains that the Declaration neither changes existing TRIPS 
obligations, nor creates new rights and does not assigns public health 
greater priority than IP protection. USTR says the Declaration 
clarifies flexibilities already in TRIPS, including the flexibility to 
compulsorily license patents under certain circumstances. USTR 
recognizes these as being allowed for WTO members, including those 
facing public health crises, but only in a fashion that will not unduly 
harm patent holders. Some developing countries assert they provide 
broad discretion to ensure access to medicines when IP regulations 
present barriers to affordable care. 

USTR balances respect for the Doha Declaration with TPA’s other two IP 
negotiating objectives by actively promoting high levels of IP 
protection for pharmaceuticals while making targeted allowances for 
developing country partners. USTR believes that this longstanding U.S. 
pursuit of high IP protections for pharmaceuticals creates incentives 
for investment in research and development of new treatments, 
ultimately enhancing public health. With regard to the TPA objective of 
respecting the Doha Declaration, USTR’s key policy change was to not 
insist upon two provisions it sees as relevant to the Declaration in 
FTAs with developing country trading partners. Otherwise, USTR has 
continued to pursue other pharmaceutical related IP protections that it 
does not consider related to the Doha Declaration. Reactions to USTR’s 
record are mixed. The pharmaceutical industry considers these types of 
FTA provisions critical for preserving incentives for research and 
innovation. However, some academics, experts, nongovernmental 
organizations (NGOs), and generic producers have expressed concerns 
that these provisions may delay entry by cheaper generic products. In 
response to similar concerns in Congress, a bipartisan agreement was 
reached with the Administration to revise four recent FTA’s prior to 
their submission for Congressional approval. 

U.S. interagency and private sector input into trade negotiations 
related to public health have remained limited since Congress enacted 
TPA. The Department of Health and Human Services (HHS) and other 
agencies generally endorse USTR’s view that strong IP protection 
promotes public health and access to medicines, and interagency input 
has been primarily technical in nature. Within the formal private 
sector trade advisory system, a public health representative was 
recently added to 2 of the 16 private sector advisory committees, but 
not until USTR had concluded nine trade agreements. USTR did obtain 
some public health views through other formal and informal means during 
this period. 

What GAO Recommends: 

If Congress disagrees with USTR’s interpretation and implementation of 
TPA guidance with regard to IP and public health, it should specify 
more clearly its intentions for U.S. trade policy and public health 
policy input. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.GAO-07-1198]. For more information, contact 
Kireb Tager at (202) 512-4347 or YagerL@gao.gov. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

The United States Has a Narrower Interpretation of the Doha Declaration 
Than Some Other WTO Members: 

USTR Has Maintained Its Pursuit of High IP Standards and Made Some 
Allowances for Doha Flexibilities in Negotiating FTAs: 

USTR Is Implementing and Overseeing Trade Agreements in a Manner 
Consistent with Its Overall Approach of Promoting High Standards 
concerning IP Rights: 

Public Health Input on IP Rights Has Been Limited in U.S. Trade 
Negotiations: 

Conclusions: 

Matter for Congressional Consideration: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: Technical Assistance on IP Rights and Public Health: 

Appendix III: GAO Contact and Staff Acknowledgments: 

Table: 

Table 1: Countries Listed in the Special 301 Report With Mention of 
Pharmaceutical-related Issues Compared to All Countries Listed (2000- 
2007): 

Figures: 

Figure 1: Timeline of Major WTO Events on IP and Public Health: 

Figure 2: FTA Pharmaceutical-Related IP Provisions and Side Letters 
Matrix: 

Figure 3: Data Exclusivity and Patent Protection, Three Possible 
Scenarios: 

Figure 4: Patent Linkage Process in the United States: 

Figure 5: Number of Pharmaceutical Provision Mentions in Special 301 
Reports (2000-2007): 

Figure 6: Public Health Representation on Industry Trade Advisory 
Committees: 

Abbreviations: 

ADI: Access to Drugs Initiative: 

ARV: antiretroviral: 

CAFTA-DR: Central America-Dominican Republic United States Free Trade 
Agreement: 

CIEL: Center for International Environmental Law: 

CPPATH: Center for Policy Analysis on Trade and Health: 

DNDI: Drugs for Neglected Diseases Initiative: 

EU: European Union: 

FDA: Food and Drug Administration: 

FSI: Foreign Service Institute: 

FTA: free trade agreement: 

GAP: Health Global Access Project:  

GDP: Gross Domestic Product: 

GPhA: Generic Pharmaceutical Association: 

HHS: Department of Health and Human Services: 

ICTSD: International Center for Trade and Sustainable Development: 

IFPMA: International Federation of Pharmaceutical Manufacturers & 
Associations: 

IP: intellectual property: 

ITAC: Industry Trade Advisory Committee: 

MSF: Doctors without Borders: 

NAFTA: North American Free Trade Agreement: 

NGO: nongovernmental organization: 

NIH: National Institutes of Health: 

OECD: Organization for Economic Cooperation and Development: 

OGAC: Office of the Global AIDS Coordinator: 

OGHA: Office of Global Health Affairs: 

OTT: Office of Technology Transfer: 

PPP: purchasing power parity: 

PEPFAR: President's Emergency Plan for AIDS Relief: 

PhRMA: Pharmaceutical Research and Manufacturers of America: 

PTO: U.S. Patent and Trademark Office: 

TEPAC: Trade and Environment Policy Advisory Committee: 

TPRG: Trade Policy Review Group: 

TPSC: Trade Policy Staff Committee: 

TRIPS: Trade-Related Aspects of Intellectual Property Rights: 

TPA: Trade Promotion Authority: 

UNAIDS: The Joint United Nations Program on HIV/AIDS: 

UNCTAD: United Nations Conference on Trade and Development: 

USAID: United States Agency for International Development: 

USTR: U.S. Trade Representative: 

WHO: World Health Organization: 

WIPO: World Intellectual Property Organization: 

WTO: World Trade Organization: 

United States Government Accountability Office: 

Washington, DC 20548: 

September 28, 2007: 

The Honorable Edward M. Kennedy: 
Chairman: 
Committee on Health, Education, Labor and Pensions: 
United States Senate: 

The Honorable Henry A. Waxman: 
Chairman: 
Committee on Oversight and Government Reform: 
House of Representatives: 

An international effort led by the United States in the 1980s to 
incorporate intellectual property (IP) protection into the trading 
system culminated with the World Trade Organization (WTO) Agreement on 
Trade-Related Aspects of Intellectual Property Rights (TRIPS) in 1995. 
Under TRIPS, all WTO member countries are obligated to establish a 
minimum standard of laws and regulations protecting copyrights, 
trademarks, patents and other forms of IP rights. Patents are 
particularly important to the U.S. pharmaceutical industry and provide 
patent owners the legal means to prevent others from making, using, or 
selling new inventions for a limited period of time, subject to certain 
conditions and exceptions. As the 2000 deadline for developing 
countries to implement TRIPS obligations approached, however, some 
developing countries expressed concern about subjecting health-related 
inventions such as new drugs to IP rules, especially given the 
increasingly serious AIDS epidemic. These concerns were part of a 
larger and still ongoing debate over how to balance long-term 
incentives for drug innovation with the short-term affordability of 
existing medicines, particularly when dealing with emergency public 
health situations. 

The 2001 WTO Doha Declaration on TRIPS and Public Health is recognized 
as a watershed event in this debate. The declaration states, in part, 
that the TRIPS Agreement does not and should not prevent members from 
taking measures to protect public health and, while reiterating a 
commitment to the TRIPS agreement, that the TRIPS Agreement should be 
interpreted and implemented in a manner supportive of WTO members' 
right to protect public health and promote access to medicines for all. 
Subsequently, in the United States, the Trade Act of 2002 granting 
Trade Promotion Authority (TPA) to the President outlined three 
principal trade negotiating objectives related to IP, one of which 
referred to the Doha Declaration.[Footnote 1] The objectives were (1) 
to promote adequate and effective protection of IP rights similar to 
U.S. law, (2) to secure fair and equitable market access opportunities 
as related to IP rights, and (3) to respect the Doha Declaration. Since 
then, negotiations at the WTO continued through late 2005 in an effort 
to resolve outstanding issues related to the Doha Declaration, and the 
United States has negotiated 11 free trade agreements (FTA); several 
are now being implemented. Some in Congress are concerned about how the 
U.S. Trade Representative (USTR) has interpreted, pursued, and 
implemented TPA principal IP objectives pertaining to the 
pharmaceutical industry, particularly in light of the third objective 
calling for respect for the Doha Declaration. 

In response to your request, this report (1) describes the Doha 
Declaration on TRIPS and Public Health and evaluates how the United 
States and other key nations have interpreted its intent and meaning, 
(2) analyzes how the United States has balanced respect for the Doha 
Declaration with the other two IP negotiating objectives in negotiating 
FTAs, (3) assesses the U.S. approach to overseeing the implementation 
of pharmaceutical-related IP provisions in FTAs and other agreements, 
and (4) evaluates the nature and extent of public health related agency 
and private sector input into trade negotiations. You also expressed 
interest in technical assistance on IP rights and public health that 
U.S. agencies provide to foreign countries. Appendix II provides an 
overview of U.S. technical assistance and technology transfer 
activities. 

To meet these reporting objectives, we performed reviews of agency 
documentation and correspondence, WTO documents and meeting minutes, 
academic studies, pharmaceutical industry and public health advocacy 
group reports and position papers, and media reports. We examined the 
text of the FTAs negotiated since the Trade Act of 2002 and compared 
the language of the IP pharmaceutical provisions found in each FTA. In 
addition, we examined trends and patterns found in USTR's annual 
reports identifying foreign countries that deny adequate and effective 
protection of IP rights. We traveled to Geneva, Switzerland, to meet 
with officials from the U.S. Mission in Geneva, WTO, World Health 
Organization (WHO), World Intellectual Property Organization (WIPO), 
The Joint United Nations Program on HIV/AIDS, the Global Fund to Fight 
AIDS, Tuberculosis and Malaria, as well as nongovernmental 
organizations (NGO) from the pharmaceutical sector and public health 
community. To evaluate the nature and extent of interagency input to 
USTR from other executive branch agencies such as the Department of 
State, Department of Health and Human Services (HHS), and Department of 
Commerce, including the Patent and Trademark Office (PTO), we reviewed 
documentation and interviewed officials. Regarding private sector 
input, we interviewed agency officials and reviewed documents such as 
formal advisory committee reports, responses to Federal Register 
notices, and correspondence related to the trade advisory system. 
Currently, there is ongoing litigation regarding the balance of 
representation on certain trade advisory committees. In accordance with 
GAO policy, we did not take any position on matters under litigation, 
which in this case meant on the appropriateness of the current 
composition of the trade advisory committees. Regarding technical 
assistance, we interviewed agency officials and reviewed agency 
documents. We also interviewed stakeholders to gather perspectives on 
the range of issues involved, including pharmaceutical industry 
representatives, public health groups, academics, and selected IP 
experts; each had recently published or spoken on this issue. Access to 
medicines is recognized as a complex issue driven by many factors, 
including funding levels, infrastructure, and effective institutions, 
which are addressed by various U.S. government programs and 
international efforts. As agreed with your staff, we did not seek to 
independently assess the actual or potential effect of these larger 
U.S. trade efforts on public health and access to medicines. 

See appendix I for a detailed discussion of our scope and methodology. 
See appendix II for information about technical assistance on IP rights 
and public health. We conducted our review from November 2006 through 
September 2007 in accordance with generally accepted government 
auditing standards. 

Results in Brief: 

The Doha Declaration on TRIPS and Public Health was adopted by WTO 
members as a carefully crafted compromise among competing perspectives 
that stresses the importance of implementing the TRIPS agreement in a 
manner supportive of public health. Balancing the goals of promoting 
both access to existing medicines and development of new medicines, it 
was a separate declaration adopted at their Fourth Ministerial 
Conference on November 14, 2001, in Doha, Qatar. The United States 
interprets the declaration as a political statement that recognizes the 
severity of public health crises while affirming the importance of IP 
protection. It maintains that the declaration neither changes existing 
TRIPS obligations nor creates new obligations, and does not assign 
public health greater priority than IP protection. Instead, USTR says, 
the declaration simply clarifies certain flexibilities already in TRIPS 
for WTO members facing public health crises, including overriding 
patents through the issuance of compulsory licenses under certain 
circumstances. Supported to some extent by other developed countries 
such as the European Union (EU) members, Japan, and Switzerland, USTR 
recognizes these flexibilities as being allowed for WTO members, 
including those facing public health crises, but only in a fashion that 
will not unduly harm patent holders. Some developing countries believe 
they provide broad discretion to ensure access to medicines when IP 
regulations present barriers to addressing not only health issues, but 
also social welfare. Differences between the United States and key 
developing WTO countries such as Thailand, Brazil, and India over a 
narrower versus a broader interpretation continued well after the 2001 
declaration. Notably, in debate over how to help countries with little 
or no manufacturing capacity in the pharmaceuticals sector take full 
advantage of the flexibilities, controversy emerged over which members 
should be eligible and for what diseases. 

USTR maintains that it balances respect for the Doha Declaration with 
TPA's other two IP negotiating objectives by actively promoting high 
levels of IP protection related to pharmaceuticals while making 
targeted allowances for Doha Declaration flexibilities for developing 
country partners. USTR believes that this continuation of long-standing 
U.S. pursuit of high IP protections for pharmaceuticals creates 
incentives for investment in research and development of new 
treatments, which in turn enhances public health. With regard to the 
TPA objective to respect the Doha Declaration, USTR officials told us 
that the key policy implication was to not insist upon two 
pharmaceutical-related IP provisions it sees as relevant to the 
Declaration with developing country trading partners. Otherwise, USTR 
has continued to pursue a number of other pharmaceutical-related IP 
protections that USTR does not consider related to the Doha 
Declaration. Reactions to USTR's approach to its trade negotiations 
have been mixed. The pharmaceutical industry considers these types of 
FTA provisions to be crucial in preserving incentives for future 
research and innovation. However, some academics, public health 
experts, NGOs, and generic pharmaceutical producers have said such 
provisions could delay entry of cheaper generic products onto the 
market, thereby decreasing access to affordable medication and 
violating the spirit and principles of the Doha Declaration. Several 
Members of Congress have also expressed similar concern over the 
pharmaceutical-related IP provisions in FTAs with developing countries, 
and this concern was recently addressed through a bipartisan 
compromise, between Congress and the administration, to revise, prior 
to their submission to Congress, the last four FTAs concluded under 
TPA. 

USTR's approach to overseeing the implementation of pharmaceutical- 
related IP provisions is consistent with its overall negotiating 
approach in FTAs, which is to secure high levels of IP protection. 
Following FTA negotiations, USTR rigorously oversees trading partner 
implementation of pharmaceutical-related IP provisions, in order to 
advise the President whether he can determine that the FTA partner has 
taken the measures necessary to comply with the provisions of the FTA 
that are to take effect on the date the FTA enters into force. In 
addition, in its annual report detailing global IP challenges, USTR has 
focused largely on the same pharmaceutical IP provisions concentrated 
on during FTA negotiations, in keeping with its strategy of gaining 
high levels of IP protection for pharmaceutical products, similar to 
U.S. law. However, USTR has had a measured response to Thailand and 
Brazil's recent usage of a TRIPS flexibility, compulsory licensing. For 
example, when Thailand recently issued a compulsory license, USTR 
acknowledged its right to do so, restricting its criticism to 
commenting on a lack of transparency. 

Input related to public health into U.S. trade negotiations has 
remained limited since Congress enacted TPA. In negotiating trade 
agreements under TPA, the President must seek advice and information 
from executive departments and public and private sectors.[Footnote 2] 
HHS and other agencies involved in the interagency trade policy process 
generally endorse USTR's view that strong IP protection promotes public 
health and access to medicines, but interagency input has been 
primarily technical in nature. For instance, HHS, the lead U.S. health 
agency, ensures that IP provisions related to pharmaceuticals in FTAs 
do not violate U.S. law, but has not addressed policy-related 
questions, such as whether FTA provisions might affect public health in 
trading partner countries. Within the formal private sector trade 
advisory system that plays a role under TPA in reviewing trade 
agreements, a public health representative was recently added to 2 of 
the 16 private sector industry trade advisory committees, after USTR 
had concluded nine trade agreements. The two advisory committees that 
the public health representatives were appointed to are respectively 
composed of 20 and 33 private sector representatives from the 
pharmaceutical and other industries. Although USTR has received limited 
input on public health through the formal advisory system, the agency 
has obtained some public health views through other formal and informal 
means throughout the period, such as public hearings, Federal Register 
comments, and written correspondence. 

In this report, we suggest that Congress should consider this record as 
it contemplates renewal of Trade Promotion Authority (TPA) and, if it 
has concerns over USTR's approach to date, may wish to specify more 
clearly its intentions for U.S. trade policy and input related to 
balancing public health concerns and the negotiation of IP protections 
in trade agreements. 

Background: 

By way of providing context for our examination of U.S. trade policy as 
it relates to TPA guidance and the Doha Declaration on TRIPS and Public 
Health, the following is an overview of ongoing U.S. government efforts 
to address the wider issue of access to medicine and public health both 
related and unrelated to IP, as well as how the WTO first became 
involved in public health issues, and the origin of IP and public 
health in TPA. 

U.S. Government Has Addressed IP and Access to Medicine: 

The U.S. government has supported innovation, competition, and access 
to medicine. The Federal government, primarily through the National 
Institutes of Health (NIH), conducts and supports medical research, 
investing annually over $28 billion. About 55 percent of NIH's budget 
supports basic research. While basic research may not have an immediate 
impact on drug innovation, such "untargeted" research often ultimately 
leads to developing new medicines and technologies. 

In principle, U.S. intellectual protection laws are designed to support 
innovation. Patents are considered to be especially valuable for 
innovations in pharmaceuticals.[Footnote 3] According to the 
pharmaceutical industry, IP protection is crucial to its ability to 
offer new, innovative medicines. Research and development of new drugs 
is very risky and time-consuming. The industry faces high fixed or 
"sunk" costs associated with lengthy discovery and clinical trials. 
Moreover, a large proportion of new drugs never make it to market due 
to their lack of efficacy or inadequate safety. Thus, drug companies 
seek a relatively high return on the medicines they do bring to market. 
U.S. patents give companies a 20-year period during which they have an 
exclusive right to make, sell, and use their invention.[Footnote 4] 
They use this period when they cannot be undercut by competitors to 
charge relatively higher prices, thus allowing them to recoup their 
investments and earn profits. However, the effective life of a patent 
is typically much shorter than this 20-year period, since the 
preclinical and clinical testing phases necessary for securing FDA 
marketing approvals can take more than a decade. 

Public policy has also played a role in fostering generic competition 
to hold down prices. Generic drugs--copies of brand-name drugs--can 
enter the market after the brand-name's patent or other market 
exclusivities expire and FDA approval is granted. Under the Hatch- 
Waxman Act of 1984,[Footnote 5] generic manufacturers do not have to 
repeat expensive research and clinical trials to obtain 
approval.[Footnote 6] Instead, they only need to show the FDA that 
their drugs are bioequivalent to the branded medicines.[Footnote 7] 
Because they do not incur the same research and clinical trial 
expenditures, generic firms can enter the market more quickly once 
patents have expired and sell drugs at lower prices. Generic entry may 
also put pressure on innovator companies to develop more new drugs. 

Governments have also taken collective and individual steps to provide 
medicines--particularly since 2001. At the global level, funds for 
combating HIV/AIDS through the Global Fund to Combat AIDS, Tuberculosis 
and Malaria, established in 2003, and UNAIDS, established in 1994, have 
grown considerably since 2001. Among other things, the United States 
established the President's Emergency Plan for AIDS Relief, or PEPFAR, 
a 5-year, $15 billion initiative run by the Office of the Global AIDS 
Coordinator at State, which has supported HIV prevention activities, 
antiretroviral treatment and training, and HIV-related care and 
training at more than 15,000 project sites primarily in 15 focus 
countries, mainly in sub-Saharan Africa.[Footnote 8] More affluent 
developing countries, such as Brazil and Thailand, have themselves been 
taking more aggressive steps to combat AIDS and improve access, 
including universal access schemes paid for with public funds. 

Some of these government efforts have been undertaken with private 
sector support. The research-based pharmaceutical industry has engaged 
in private-public partnerships to address neglected diseases found in 
poor countries, such as tuberculosis and malaria. Research-based 
pharmaceutical companies have also instituted pricing schemes whereby 
the same drug is sold at different prices, depending on the consumer's 
or country's ability to pay. Ensuring that the supply remains in the 
intended market, not resold elsewhere, is critical to this strategy's 
success, but can be problematic. Governments have also supported 
industry efforts to donate medicines outright--about $4.4 billion worth 
of medicines and other medical help over the 2000-2005 period, 
according to estimates by the London School of Economics.[Footnote 9] 

Access to Medicines Remains a Global Challenge: 

Despite government and industry initiatives, available data suggest 
that many people currently lack access to existing medicines. According 
to the World Health Organization (WHO), one third of the global 
population does not have regular access to essential medicines. This 
matters: WHO estimates that over 10.5 million lives a year could be 
saved by 2015 by scaling up access to existing interventions for 
infectious diseases, maternal and child health, and noncommunicable 
diseases. Indeed, WHO says unaffordable prices of medicine and the need 
for new medicines for diseases that disproportionately affect lower 
income populations are among the primary challenges in expanding access 
to medicines globally. According to WHO, in developing countries today, 
medicines account for up to 70 percent of health care expenditure. This 
compares to less than 15 percent in most high income countries, and 
about 10 cents of every health care dollar spent in the United States 
in 2005. Because of this imbalance in health care expenditure 
worldwide, WHO's various projects on access to medicines and IP rights 
continue.[Footnote 10] The Group of 8 Industrialized Nations, the 
Organization for Economic Cooperation and Development (OECD), and the 
United Nations Conference on Trade and Development (UNCTAD) are among 
the other organizations that have also undertaken efforts to address 
aspects of the issue. 

IP and Pharmaceuticals Became Part of WTO at Its Inception in 1995: 

The April 1994 Final Act Embodying the Results of the Uruguay Round of 
Multilateral Trade Negotiations led to the establishment of WTO on 
January 1, 1995. The Uruguay round was the product of long and complex 
negotiations that not only liberalized manufactured goods trade in such 
sectors as apparel, but also added IP and services rules and 
obligations to the trading system. The WTO TRIPS Agreement was part of 
the Uruguay Round's results and established minimum levels of 
protection that each government has to give to IP of fellow WTO 
members. The United States had fought hard to secure worldwide adoption 
of minimum IP protection and enforcement standards through TRIPS as 
home to the world's largest and most innovative pharmaceutical 
industry. TRIPS extended patent protection for inventions of both 
products and processes, while allowing certain exceptions, for at least 
20 years. It also required WTO members, when requiring as a condition 
of marketing approval the submission of undisclosed test data or other 
data (such as data submitted to health authorities for regulatory 
approval of pharmaceutical safety), the origination of which involves 
considerable effort, to protect such data, against unfair commercial 
use.[Footnote 11] When all of the WTO agreements took effect, developed 
countries were given 1 year to ensure their laws and practices 
conformed with TRIPS, but developing countries were given transition 
periods of 5 or more years. Even so, many developing countries 
complained about having to comply with the new requirements. 

The HIV/AIDS Pandemic Put Access to Medicine in the Forefront for WTO: 

The issue of IP and access to medicine came to a head at WTO in 2001 
when the HIV/AIDS pandemic in sub-Saharan Africa was reaching 
catastrophic levels. Separately, South Africa attempted to use its laws 
to lower prices for imported medicines, but faced opposition from U.S. 
and other drug companies that felt its actions compromised their 
rights. Brazil and the United States, meanwhile, were in dispute over a 
Brazilian law that could make exceptions to patents if products were 
not manufactured in Brazil. Nongovernmental organizations (NGO) became 
involved in discussing the implications of TRIPS to public health. 

In April of 2001, WTO and the World Health Organization (WHO) jointly 
sponsored a workshop on pricing and access to medicine. Initially, many 
WTO members were skeptical about whether WTO was the proper forum for 
the debate. However, this quickly changed when the African members 
successfully pleaded their case for help in resolving the AIDS 
pandemic, and WTO members subsequently devoted one day to the issue in 
June 2001, then continued discussions throughout the summer of the same 
year. Subsequently, the Declaration on the TRIPS Agreement and Public 
Health was adopted at the fourth WTO Ministerial Conference in Doha, 
Qatar, on November 14, 2001. As shown in figure 1, the Declaration on 
TRIPS and Public Health was the first of three important decisions over 
the next several years, all of which are discussed in detail later in 
this report. 

Figure 1: Timeline of Major WTO Events on IP and Public Health: 

This figure is a chart showing a timeline of major WTO events on IP and 
public health. The declaration on the TRIPS agreement and public health 
was adopted on November 14, 2001. Several years later, there was the 
implementation of paragraph 6 of the Doha declaration on the TRIPS 
agreement and public health decision of August 30, 2003. Then in 2005, 
the amendment of the TRIPS agreement occurred on December 6, 2005. 

[See PDF for image] 

Source: World Trade Organization. 

[End of figure] 

Congress Addressed IP and Public Health in Trade Promotion Authority 
Legislation: 

Shortly after WTO adopted the Declaration on TRIPS and Public Health, 
Congress passed the Trade Act of 2002, which granted the President 
Trade Promotion Authority (TPA) for reciprocal trade agreements to 
liberalize U.S. trade with foreign nations. TPA contains guidance from 
Congress concerning U.S. goals in negotiated trade agreements. One of 
the three goals for IP specified in TPA, "to respect the Doha 
Declaration on TRIPS and Public Health," was added in response to an 
amendment by Senator Edward Kennedy. In his remarks about the 
amendment, Senator Kennedy explained that the Declaration on TRIPS and 
Public Health struck a balance between the legitimate interests of 
intellectual property protection and the preservation of public health. 
Senator Kennedy went on to assert that "[t]his amendment directs our 
trade negotiators to support the declaration without 
reservation."[Footnote 12] Senators Grassley and Baucus also asserted 
their support for the amendment and emphasized the importance of IP 
issues with respect to public health and innovation of new medicines. 
Congress otherwise provided no guidance at the time on how to interpret 
and apply this TPA objective. Recently, in response to the expiration 
of the President's Trade Promotion Authority (TPA) on June 30, 2007, 
before the Doha round of global trade talks had been successfully 
concluded, there have been some calls to renew it. 

The United States Has a Narrower Interpretation of the Doha Declaration 
Than Some Other WTO Members: 

To help address public health problems affecting many developing 
countries, WTO members adopted the Doha Declaration (reprinted in full 
below) to stress the importance of implementing the TRIPS agreement in 
a manner supportive of public health.[Footnote 13] As part of a 
carefully worded compromise among competing perspectives, this 
statement was placed in the context of shared challenges and goals, 
such as promoting both access to existing medicines and research into 
and development of new medicines. The United States interprets the 
declaration as a political statement recognizing public health crises 
and affirming the importance of IP protection that neither changes 
existing TRIPS obligations nor creates new obligations, and does not 
assign public health greater priority than IP protection. 
Significantly, the declaration clarifies certain flexibilities explicit 
in TRIPS that allow WTO members to address public health crises. USTR 
argues that these flexibilities should be applied judiciously and 
subject to certain conditions specified in the TRIPS agreement. Some 
developing countries, however, believe these flexibilities provide 
broad discretion to ensure access to medicines when IP regulations 
present barriers to addressing not only health issues, but also social 
welfare. Differences over a narrower versus broader interpretations 
continued long after the declaration. Notably, debate over how to help 
countries with little or no pharmaceuticals manufacturing capacity take 
full advantage of the flexibilities, including which members should be 
eligible and for what diseases, became controversial. 

Declaration on the TRIPS Agreement and Public Health: 

1. We recognize the gravity of the public health problems afflicting 
many developing and least-developed countries, especially those 
resulting from HIV/AIDS, tuberculosis, malaria and other epidemics. 

2. We stress the need for the WTO Agreement on Trade-Related Aspects of 
Intellectual Property Rights (TRIPS Agreement) to be part of the wider 
national and international action to address these problems. 

3. We recognize that intellectual property protection is important for 
the development of new medicines. We also recognize the concerns about 
its effects on prices. 

4. We agree that the TRIPS Agreement does not and should not prevent 
members from taking measures to protect public health. Accordingly, 
while reiterating our commitment to the TRIPS Agreement, we affirm that 
the Agreement can and should be interpreted and implemented in a manner 
supportive of WTO Members' right to protect public health and, in 
particular, to promote access to medicines for all. 

In this connection, we reaffirm the right of WTO Members to use, to the 
full, the provisions in the TRIPS Agreement, which provide flexibility 
for this purpose. 

5. Accordingly and in the light of paragraph 4 above, while maintaining 
our commitments in the TRIPS Agreement, we recognize that these 
flexibilities include: 

a. In applying the customary rules of interpretation of public 
international law, each provision of the TRIPS Agreement shall be read 
in the light of the object and purpose of the Agreement as expressed, 
in particular, in its objectives and principles. 

b. Each Member has the right to grant compulsory licenses and the 
freedom to determine the grounds upon which such licenses are granted. 

c. Each Member has the right to determine what constitutes a national 
emergency or other circumstances of extreme urgency, it being 
understood that public health crises, including those relating to HIV/ 
AIDS, tuberculosis, malaria and other epidemics, can represent a 
national emergency or other circumstances of extreme urgency. 

d. The effect of the provisions in the TRIPS Agreement that are 
relevant to the exhaustion of intellectual property rights is to leave 
each Member free to establish its own regime for such exhaustion 
without challenge, subject to the MFN and national treatment provisions 
of Articles 3 and 4. 

6. We recognize that WTO Members with insufficient or no manufacturing 
capacities in the pharmaceutical sector could face difficulties in 
making effective use of compulsory licensing under the TRIPS Agreement. 
We instruct the Council for TRIPS to find an expeditious solution to 
this problem and to report to the General Council before the end of 
2002. 

7. We reaffirm the commitment of developed-country Members to provide 
incentives to their enterprises and institutions to promote and 
encourage technology transfer to least-developed country Members 
pursuant to Article 66.2. We also agree that the least-developed 
country Members will not be obliged, with respect to pharmaceutical 
products, to implement or apply Sections 5 and 7 of Part II of the 
TRIPS Agreement or to enforce rights provided for under these Sections 
until 1 January 2016, without prejudice to the right of least-developed 
country members to seek other extensions of the transition periods as 
provided for in Article 66.1 of the TRIPS Agreement. We instruct the 
Council for TRIPS to take the necessary action to give effect to this 
pursuant to Article 66.1 of the TRIPS Agreement. 

The Doha Declaration Addresses Flexibilities in TRIPS That Can Be Used 
to Deal with Public Health Crises: 

In the wake of the HIV/AIDS crisis at the time, some WTO members were 
concerned about the extent to which the TRIPS agreement allowed them to 
address public health needs. The African members known as the African 
Group were among the members pushing for clarification. WTO members 
formally addressed this issue in the main Doha Ministerial Declaration 
and their intention to adopt a separate declaration, as shown below. 

Ministerial Declaration - Fourth Session November 2001: 

Paragraph 17: 

We stress the importance we attach to implementation and interpretation 
of the Agreement on Trade-Related Aspects of Intellectual Property 
Rights (TRIPS Agreement) in a manner supportive of public health, by 
promoting both access to medicines and research and development into 
new medicines and, in this connection, are adopting a separate 
Declaration. 

The Doha Declaration is divided into seven paragraphs. Paragraphs one 
through four are general principles that WTO members agreed to that 
describe the relationship between IP rights and public health. 

Paragraph five lays out specific flexibilities provided in TRIPS that 
can be used by WTO members to address public health related problems. 
Below is a summary of these flexibilities: 

5(a) that each provision in TRIPS should be read in light of the 
agreement's objectives and principles; 

5(b) the right to grant compulsory licenses. The WTO fact sheet on 
TRIPS and pharmaceuticals describes the term compulsory licensing as 
when a government allows someone else to produce the patented product 
or process without the consent of the patent owner--in this case in 
reference to pharmaceuticals, but it could also apply to patents in any 
field.[Footnote 14] 

5 (c) the right to determine what is a national emergency; and: 

5 (d) the right to establish an exhaustion regime without challenge. 
The WTO fact sheet on TRIPS and pharmaceuticals describes the term 
exhaustion as a legal principle consisting of the idea that once a 
company (patent holder) has sold a batch of its product, its patent 
distribution rights are exhausted with respect to that batch, and it no 
longer has any rights to control distribution of that batch. Exhaustion 
is the legal principal behind parallel imports. [Footnote 15] 

WTO members appear to agree that the TRIPS and Public Health 
declaration makes no change to TRIPS itself. However, two changes are 
foreshadowed. Specifically, paragraphs six and seven calls upon WTO 
members to take future action in specific areas. Paragraph six mandates 
WTO members to resolve a potential problem with regard to compulsory 
licensing by WTO members with insufficient or no pharmaceutical 
manufacturing capacities. Because TRIPS specifies that a country may 
only compulsory license primarily for supplying the domestic market, 
countries with little or no manufacturing capacity (and therefore no 
domestic company to which the government could grant a compulsory 
license) could face difficulties in effectively using compulsory 
licensing. They must import their medicines, but the supplier (the 
exporter) would be prevented under TRIPS from exporting them the 
patented medicines under a compulsory license if the product was 
patented in its territory. Paragraph seven instructs WTO members to 
take the steps necessary to extend the deadline from for least 
developed countries to implement their TRIPS obligations with respect 
to pharmaceutical products to 2016.[Footnote 16] 

The United States Has a Narrower Interpretation of the Declaration Than 
Some Other WTO Members: 

The United States believes that the declaration does not change 
existing TRIPS obligations or create new rights, nor does it give 
public health greater priority than IP protection. Overall, leading up 
to Doha and since, the United States has consistently opposed creating 
broader exemptions to TRIPS to protect public health, but instead has 
called for permitting targeted exceptions to TRIPS to avoid eroding 
patent protections that it deems necessary for research and development 
of medicines to treat life-threatening diseases. Some developing 
countries had wanted to modify TRIPS provisions if they were considered 
insufficient to protect public health. 

According to a USTR official, paragraph four of the declaration-"The 
TRIPS agreement does not and should not prevent members from taking 
measures to protect public health."--does not provide a broad exception 
in TRIPS for public health purposes and in addition, the provision 
should be considered in context with the rest of the declaration. Some 
developing countries had originally called for the declaration to have 
stronger language-"Nothing in the TRIPS agreement should prevent 
Members from taking measures to protect public health."-in an attempt 
to make the declaration legally binding. 

With regard to paragraph five, which enumerates flexibilities in TRIPS 
that may be used to address public health, the United States supports 
the view that these flexibilities preserve the ability of members to 
formulate public health policies while also maintaining effective 
patent systems. But some developing countries see paragraph five as 
providing broader discretion to address public health. For example, a 
group of developing countries, including the African Group, Brazil, 
India, and Thailand, has maintained that there should be a common 
understanding that confirms the right of governments to ensure access 
to medicines at affordable prices and to make use of TRIPS provisions 
whenever the scope or exercise of IP regulations results in barriers to 
access to medicine. These members believe that TRIPS objectives and 
principles (referred to in the last phrase in paragraph five (a) of the 
declaration) support the view that TRIPS protections are and should be 
contingent on IP rights contributing to social goals, such as nutrition 
and social and economic welfare. (TRIPS objectives and principles are 
found in articles 7 and 8 respectively, shown below). 

TRIPS Article 7 - Objectives: 

The protection and enforcement of intellectual property rights should 
contribute to the promotion of technological innovation and to the 
transfer and dissemination of technology, to the mutual advantage of 
producers and users of technology knowledge and in a manner conducive 
to social and economic welfare, and to a balance of rights and 
obligations. 

TRIPS Article 8 - Principles: 

Members may, in formulating or amending their laws and regulations, 
adopt measures necessary to protect public health and nutrition, and to 
promote the public interest in sectors of vital importance to their 
socio-economic and technological development, provided that such 
measures are consistent with the provisions of this Agreement. 

Appropriate measures, provided that they are consistent with the 
provisions of this Agreement, may be needed to prevent the abuse of 
intellectual property rights by right holders or the resort to 
practices which unreasonably restrain trade or adversely affect the 
international transfer of technology. 

The United States has maintained that, rather than impeding access to 
medicines, patent regimes meet the objectives of article 7 by 
contributing to the promotion of technological innovation and 
dissemination of technology. Furthermore, the United States has argued 
that the final clause in article 8-"provided that such measures are 
consistent with the provisions of [the TRIPS ]Agreement"-precluded 
article 8 from providing such a broad exception to the obligations of 
TRIPS. The European Union (EU), Switzerland, and Japan were concerned 
that the countries were suggesting the ability to make significant 
exceptions to patent protection under TRIPS. 

The interpretation of paragraph five (b) on compulsory licensing has 
sparked the most controversy among WTO members. The WTO fact sheet on 
TRIPS and pharmaceuticals describes the declaration as affirming 
compulsory licensing [as a TRIPS flexibility] as part of its overall 
attempt to strike a balance between promoting access to existing drugs 
and promoting research and development into new drugs.[Footnote 17] 
Significantly, the declaration clarifies that WTO members can determine 
the grounds for issuing a compulsory license. This is because TRIPS 
does not specifically list the reasons that might be used to justify 
compulsory licensing, but rather enumerates a number of conditions for 
doing so.[Footnote 18] 

During the debate over the declaration, the United States stressed 
that, while it considered compulsory licensing to sometimes be 
appropriate, it believed its widespread use for any purpose could have 
negative implications for the patent system and, more importantly, for 
the availability and development of new drugs. Moreover, the United 
States argued using compulsory licensing as a mechanism for directing 
industrial policy or protecting domestic industries against foreign 
competition would be contrary to the letter and purpose of TRIPS. 

In addition, USTR emphasizes that while the declaration is clear that 
members can determine the grounds for compulsory licensing, they still 
must meet certain conditions articulated in TRIPS article 31. These are 
aimed at protecting the legitimate interests of the patent holder when 
circumstances allow compulsory licensing and government use of a patent 
without the authorization of the patent holder. Summarized below are 
some relevant excerpts from selected article 31--"Other use without 
authorization of the patent holder"--provisions, including important 
exceptions in recognition of the fact that time can be of the essence 
in some situations, such as national emergencies. Basically, with some 
exceptions, whoever issues a compulsory license must first inform the 
patent holder and seek to obtain authorization (voluntary license) from 
the patent holder. In all cases, they must remunerate the patent 
holder. 

Summaries of article 31(b) (h) (k) provisions: 

* Prior to use, user makes effort to obtain authorization from the 
patent holder on reasonable commercial terms and conditions within a 
reasonable period of time. 

* Above authorization requirement may be waived in cases of: 

- national emergency or other circumstances of extreme urgency: 

- public noncommercial use: 

- to correct anticompetitive practices as determined by judicial or 
administrative processes. 

* Patent holder shall be: 

- notified as soon as reasonably practicable in case of national 
emergency: 

- informed promptly in case of noncommercial use: 

* Patent holder shall receive adequate remuneration. 

Some developing countries, including the African Group, Brazil, India, 
and Thailand, expressed the view that the TRIPS agreement in no way 
stands in the way of public health protection, and therefore that it 
should provide the broadest flexibility for the use of compulsory 
licensing to obtain lower cost medicines. Differences over compulsory 
licensing have continued to reemerge, including later during the later 
debate over how to resolve the paragraph six problem. 

Finally, the United States and some WTO members have different 
interpretations of paragraph five (d), which says that TRIPS leaves 
each member free from challenge to establish its own exhaustion regime, 
based on TRIPS article 6 (shown below). 

TRIPS Article 6 - Exhaustion: 

For the purposes of dispute settlement under this Agreement, subject to 
the provisions of Articles 3 and 4, nothing in this Agreement shall be 
used to address the issue of the exhaustion of intellectual property 
rights. 

The United States stated during the debate leading up to the 
declaration that it did not interpret this to mean that TRIPS permits 
parallel imports,[Footnote 19] and expressed misgivings about their 
use. To be specific, USTR pointed out that permitting parallel imports 
inhibits the patent holder's willingness to offer prices differentiated 
according to countries' ability to pay. This is because, when prices 
are higher in one country than in others, there is a tendency for 
diversion to higher income countries. These are precisely the markets 
where patent owners want to maintain high prices in order to recoup 
costs and earn the profits that fund future research. This differential 
pricing has been a key feature of pharmaceutical industry efforts to 
promote improved access to medicine since the Doha Declaration. 

In contrast to the U.S. position, some developing countries, including 
the African Group, Brazil, India, and Thailand, called parallel 
importation a significant way of increasing access to medicines, 
particularly for developing countries, and a relevant tool when 
compulsory licenses may be ineffective. 

Differences over a Narrower Versus a Broader Approach Continued in 
Debating the 2003 and 2005 Council Decisions: 

Differences over whether the use of compulsory licensing should be 
restricted or widespread continued during the subsequent debate leading 
up to the 2003 Council Decision on the Implementation of Paragraph Six. 
The United States believed that situations requiring a compulsory 
license for export (sometimes referred to as the "paragraph six 
solution") would likely be somewhat limited but emphasized that the 
grave health problems faced by certain developing and least developed 
countries made a solution imperative. The United States called for 
restricting compulsory licensing for export to a narrower set of 
scenarios to ensure that only countries facing genuine crises and with 
no effective manufacturing capacity could use it. WTO members disagreed 
about the legal means to address paragraph six and its scope and 
coverage, including which members should participate in the solution 
and for what diseases. 

USTR Maintained Paragraph Six Would Be Less Applicable in the Near 
Term: 

During deliberations in 2001 leading up to the Declaration, the United 
States maintained that situations requiring a paragraph six solution 
would likely remain somewhat limited in the near term, but recognized 
that the grave health problems faced by certain developing and least 
developed countries foreshadowed serious consequences should they 
occur. First, difficulties falling under paragraph six would only be 
expected to arise when pharmaceuticals were not provided by the patent 
holder through normal commercial arrangements or through discount, 
donation, or other aid programs. In addition, a paragraph six solution 
would only apply if a patent existed in the WTO member country or 
territory that was exporting the pharmaceutical. However, some 
developing countries at the time were not obligated to provide patents 
until January 2005, most notably India.[Footnote 20] 

WTO Members Differed on the Legal Means to Address Paragraph Six: 

The legal mechanism by which to address paragraph six could also affect 
the widespread use of compulsory licensing and the effective force of 
TRIPS obligations. WTO members had to decide whether to craft the 
paragraph six solution on the basis of TRIPS article 30 or on a waiver 
of article 31. The United States and the EU supported article 31. The 
United States argued that a targeted moratorium or waiver of 
obligations of TRIPS article 31(f) (see below) was the most 
expeditious, workable, transparent, sustainable, and legal solution. 
Essentially, the TRIPS requirement that compulsory licensing should be 
primarily for domestic use would be waived. 

TRIPS Article 31: 

"Other use without authorization of the patent holder" 

Where the law of a Member allows for other use of the subject matter of 
a patent without the authorization of the right holder, including use 
by the government or third parties authorized by the government, the 
following provisions shall be respected: 

Article 31 (f): Any such use shall be authorized predominantly for the 
supply of the domestic market of the Member authorizing such use; 

The African Group also supported the article 31 approach and had laid 
out several options for doing so. Above all, however, they said that 
they wanted an expeditious solution. According to WTO officials, there 
was a tacit agreement among the WTO members that the African Group "had 
the moral high ground" on this issue because the HIV/AIDS pandemic was 
so acute in Africa. 

Alternatively, countries such as Brazil, India, and Thailand argued 
that the best solution was to interpret TRIPS article 30 (see below) so 
as to recognize the right of WTO members to authorize third parties to 
make, sell, and export patented public-health-related products, without 
the consent of the patent holder to address the public health needs in 
another country. These acts would be considered "limited exceptions to 
the exclusive rights" conferred by patents. The countries argued that 
an authoritative interpretation of article 30 would also have the 
advantage of avoiding the potentially cumbersome requirement under a 
waiver of article 31(f) that the exporting country must also grant a 
compulsory license as well as change its own laws to allow compulsory 
licensing for exporting. 

TRIPS Article 30: 

Members may provide limited exceptions to the exclusive rights 
conferred by a patent, provided that such exceptions do not 
unreasonably conflict with a normal exploitation of the patent and do 
not unreasonably prejudice the legitimate interests of the patent 
owner, taking account of the legitimate interests of third parties. 

USTR contended that such a broad reinterpretation of article 30 
allowing members to amend their patent laws to permit compulsory 
licenses would unreasonably conflict with patent owners' normal 
exploitation of patents and with their legitimate interests. 
Furthermore, unlike article 31, article 30 contains no procedural 
safeguards, such as requirements for notifying a patent owner of use, 
establishing terms and conditions, or remuneration to the patent 
holder. USTR stated that creating an exception through article 30 was 
hard to defend legally as being consistent with TRIPS. Moreover, it 
contended that there was too much danger that such an exception would 
be misused and thus subject to dispute settlement challenge. 

WTO Members Disagreed on Countries Covered under Paragraph Six: 

The question of which countries should be able to take advantage of a 
paragraph six solution also provoked controversy. Basically, the United 
States and other WTO members with large name-brand pharmaceutical 
industries, including the EU and Switzerland, wanted the paragraph six 
solution to focus on developing and least developed countries lacking 
pharmaceutical manufacturing capacity as importing beneficiaries. The 
United States wanted to establish specific procedures to clarify which 
developing country members could be considered to have insufficient or 
no manufacturing ability, and thought it inappropriate to extend the 
solution to developed countries or to countries that had manufacturing 
capacity but chose not to manufacture certain drugs based on policy, 
economic, or other reasons. WTO officials told us they tried to collect 
data on manufacturing capability, but could find none. Ultimately, the 
2003 Council Decision required importing countries to explain how they 
had no or insufficient manufacturing capacity for the product in 
question. 

After facing strong resistance from other WTO members, the United 
States did not insist on a specific list of eligible countries. 
However, the United States maintained that not every member country 
should be able to use a paragraph six solution, and suggested that some 
members, such as OECD countries and certain developing countries opt 
out. WTO officials told us that the United States put pressure on many 
countries to opt out. In the end, 23 developed countries agreed to opt 
out, and the 10 countries soon to join the EU partially opted out, with 
agreement to opt out completely after they joined the EU. Finally, some 
other WTO members agreed that they would only use the system as 
importers in situations of national emergency or other circumstances of 
extreme urgency.[Footnote 21] 

United States Had Difficulty Joining Consensus on Paragraph Six 
concerning Diseases: 

The other controversial issue was the scope of diseases to be covered 
under paragraph six of the declaration. In November and December 2002, 
the United States said that it was willing to join the consensus on all 
of a paragraph six solution draft except for language on the scope of 
diseases. The United States, the EU, and Japan wanted coverage limited 
to the diseases mentioned in paragraph one of the declaration, namely 
"HIV/AIDS, TB, malaria and other epidemics" of potentially pandemic 
proportions. Others, including Brazil and Argentina, disagreed and 
wanted no restrictions on diseases. According to WTO officials, some 
WTO members discussed using either paragraph one or paragraph four- 
"access to medicine for all"-of the declaration to address the scope of 
diseases, and settled on the former after being reassured that the 
declaration did not restrict itself to specific diseases. According to 
WTO officials, in April 2003, the new TRIPS Council Chair, Singapore, 
conferred with the United States and the U.S. pharmaceutical industry, 
drafted a new paragraph six text, and led negotiations among a few 
members--namely, South Africa, Kenya, Brazil, India, and the United 
States. USTR officials noted that this group of countries represented 
the spectrum of views on this debate. The final text contained no 
specifics on diseases, but relied on paragraph one of the declaration. 

The Chairman's Statement Was a Key Condition to U.S. Support of the 
Paragraph Six Solution: 

USTR officials emphasized that the United States ultimately conditioned 
its consensus with a paragraph six solution on a statement by the 
chairman of the General Council that signaled that diversion was a key 
issue.[Footnote 22] WTO members generally agreed diversion should be 
prevented to ensure that drugs provided under the paragraph six 
solution went where intended. The separate statement by the General 
Council chairman was designed to alleviate fears that the decision 
might be abused and undermine patent protection or not effectively 
prevent drugs from being diverted. The General Council chairman stated 
that, before adopting the decision, he wanted to place on the record 
"this Statement which represents several key shared understandings of 
Members regarding the Decision to be taken and the way in which it will 
be interpreted and implemented." He went on to state that members 
recognize that the purpose of the decision would be defeated if 
products were diverted from the markets for which they were intended, 
and that all reasonable measures should be taken to prevent such 
diversion. In addition, the chairman listed the WTO members that had 
agreed to opt out of using the system as importers. 

USTR Believes the 2003 Council Decision Was a Positive One, but Some 
WTO Members Have Expressed Concerns since the Decision: 

Ultimately, the outcome of the nearly 2-year debate over a paragraph 
six solution was the adoption of the 2003 General Council Decision in 
light of the General Council chairman's statement. The decision waived 
the prohibition in TRIPS article 31(f) against exporting under a 
compulsory license to countries that cannot manufacture the 
pharmaceuticals themselves. USTR officials told us they considered it a 
positive outcome in that it provided a solution to the problem 
identified in paragraph six of the Doha Declaration, while preserving 
TRIPS rules and obligations. 

Other WTO members initially supported the outcome, but expressed some 
concern later. For example, the African Group suggested at a March 2005 
meeting of the WTO TRIPS Council that the burden of using the decision 
was the reason why, up to that point, the 2003 Council Decision had not 
been used by a country to waive TRIPS rules and import generic versions 
of patented drugs under a compulsory license. One WTO representative 
told us more recently that he considered the waiver too complicated, 
calling the packaging and labeling requirements costly and draconian 
because of the need to change production lines. 

Under the waiver, countries can produce generic copies of patented 
products under compulsory licenses to export to eligible importing 
countries, subject to certain requirements and safeguards. The terms of 
the waiver are summarized below: 

Importing members: 

* Notify TRIPS Council: names, expected quantities, of drug. 

* Other than least developed countries, establish insufficient or no 
manufacturing capacities for the product in question. 

* Take reasonable measures within their means, with possible assistance 
from developed country members, to prevent exportation elsewhere 
(diversion). 

* If product is patented in its territory, must grant or intend to 
grant a compulsory license in compliance with TRIPS Article 31. 

- Remuneration waived if product is provided by exporting country. 

- Make a determination of a national emergency, other circumstances of 
extreme urgency, or a case of public noncommercial use. 

Exporting members: 

* Export only amount necessary to meet needs of eligible importing 
member. 

* Export entirety of product produced under compulsory license to the 
eligible importing member(s) that has notified the TRIPS Council. 

* Label product to identify it as being produced under the system 
established by the decision. 

- Package and color uniquely, provided such distinction is feasible and 
does not significantly affect price. 

* Publicize on a designated Web site distinguishing features and 
quantities of medicine exporting. 

* Notify TRIPS Council: name of licensee, products, country to be 
supplied, and duration of license. 

* Adequately remunerate patent holder in the exporting member. 

All WTO members: 

* Ensure the availability of effective legal means to prevent the 
importation of products produced under the system established by the 
decision and diverted to their markets. 

According to USTR, in July 2004, the United States and Canada agreed to 
suspend applications, as between themselves, of a provision of the 
North American Free Trade Agreement (NAFTA) that parallels Article 31 
(f) of the TRIPS agreement in order to ensure that Canada could export 
drugs under the terms of the 2003 Council Decision without violating 
NAFTA. The first and only WTO member to date to notify the WTO TRIPS 
Council of its intent to use a paragraph six solution was Rwanda, in 
July 2007. 

General Council Issued 2005 Decision to Consider Amending the TRIPS 
Agreement, after Some Difficulties: 

Debate at the WTO over the 2003 Council Decision still continued for 
another 2 years. In response to a call by some WTO members, principally 
driven by the African Group, to express the 2003 Council Decision in an 
amendment to TRIPS as a more permanent solution, the 2003 Decision also 
called for WTO members to prepare an amendment to replace the decision. 
As a result, the General Council issued a decision on December 6, 2005, 
adopting a protocol amendment that is open for members to accept. It 
will become effective once the amendment is accepted by two thirds of 
the WTO membership. Thus far, eight WTO members have accepted the 
amendment, including the United States, Switzerland, El Salvador, the 
Republic of Korea, Norway, India, the Philippines, and Israel. 

The drafting of the amendment turned into another 2-year struggle. 
According to USTR, the United States wanted to ensure that agreements 
made under the 2003 Council Decision were not changed in the amendment. 
To do this, USTR proposed to include the chairman's statement as a 
footnote to the amendment. WTO members discussed the possible legal 
weight of a footnote. According to USTR, some members felt attaching 
the chairman's statement as a footnote might give it too much legal 
weight. In addition, some members wanted to make changes to the 
original 2003 Decision in the amendment. Eventually, the footnote was 
dropped and the members agreed to have the chairman's statement read 
orally, similar to the scenario followed in adopting the 2003 Council 
Decision. Despite losing the footnote, the United States believed it 
had achieved the delicate balance of preserving the solution agreed to 
under the 2003 Council Decision while promoting access to medicine with 
safeguards against diversion. 

USTR Has Maintained Its Pursuit of High IP Standards and Made Some 
Allowances for Doha Flexibilities in Negotiating FTAs: 

In negotiating FTAs, USTR said it balances respect for the Doha 
Declaration with its other two IP negotiating objectives in TPA by 
consistently promoting high standards of IP protection similar to U.S. 
law, while making allowances for the two specific flexibilities 
mentioned in the declaration. For example, USTR makes concessions to 
developing countries on compulsory licensing and parallel importing 
provisions specifically cited in the declaration. However, USTR has 
continued to pursue other pharmaceutical-related IP provisions that it 
does not see as relevant or contrary to the Doha Declaration in all of 
its FTAs, such as data exclusivity, patent term extensions, and patent 
linkage. Reactions to USTR's approach have been mixed. The 
pharmaceutical industry supports the inclusion of these protections in 
FTAs because it believes they are central to maintaining incentives for 
investment in research and development of new drugs. Some experts and 
public health advocates have raised concerns that USTR's approach 
hinders generic competition, reducing access to medicines and thus 
violating the principles of the declaration. Finally, certain Members 
of Congress have expressed concern over the pharmaceutical-related IP 
provisions in FTAs with developing countries, and this concern was 
recently addressed through a bipartisan compromise between Congress and 
the administration. 

USTR Believes That Strong IP Protection and Increased Market Access 
Promotes Public Health, and Thus Respect for the Doha Declaration: 

USTR has three principal negotiating objectives related to IP rights 
when negotiating FTAs with other countries. The Trade Act of 2002, 
which granted the President Trade Promotion Authority (TPA), contains 
guidance from Congress on U.S. negotiating objectives for trade 
agreements, including three goals on IP rights:[Footnote 23] 

1. to further promote adequate and effective protection of IP rights, 
including through ensuring that the provisions of any multilateral or 
bilateral trade agreement governing IP rights that is entered into by 
the United States reflect a standard of protection similar to that 
found in United States law; 

2. to secure fair, equitable, and nondiscriminatory market access 
opportunities for United States persons that rely upon IP protection; 
and: 

3. to respect the Doha Declaration on the TRIPS Agreement and Public 
Health, adopted by the World Trade Organization (WTO). 

USTR officials explained that USTR believes it can simultaneously 
pursue policies that advance the first two objectives of promoting IP 
rights and securing market access, while fulfilling the third objective 
to respect the Doha Declaration. Specifically, the officials noted that 
in order to pursue the first two objectives in FTAs, USTR officials 
have negotiated high levels of IP protection in FTAs that reflect 
standards of protection similar to U.S. law, and build on the minimum 
standards in TRIPS. USTR officials stated that they pursue the second 
objective of securing market access for persons who rely on IP 
protection by ensuring that products benefit from the increased 
protection and market access in the FTAs. For example, USTR officials 
noted that FTAs with more developed countries have regulatory 
provisions for pharmaceuticals and medical devices on market approval, 
price controls, and reimbursement policies. USTR sees no inherent 
conflict between active pursuit of TPA's first two objectives of 
promoting IP protection similar to U.S. law and market access 
opportunities, and the third objective of respecting the Doha 
Declaration, but rather considers these objectives complementary. USTR 
officials stated that USTR's view is that IP rights ultimately enhance 
public health by promoting innovation for new medicines and that 
therefore this approach is consistent with the Doha Declaration. 

USTR Pursues a Menu of Pharmaceutical-Related IP Provisions in FTA 
Negotiations: 

In response to the objectives laid out in TPA, USTR officials noted 
that they have pursued a menu of pharmaceutical-related IP provisions 
in its FTAs, including restrictions on compulsory licensing and 
parallel imports, and requirements to provide data exclusivity, patent 
term extensions, and patent linkage. Some of these pharmaceutical- 
related IP provisions go beyond the minimum levels of protection 
outlined in TRIPS, provoking complaints from some that they violate the 
principles and spirit of the Doha Declaration. However, USTR considers 
them consistent with its interpretation of the declaration's intent and 
meaning and with TPA guidance. 

The FTA pharmaceutical-related IP provisions, to the extent that they 
are similar across the FTAs, have been summarized below. However, it is 
important to note that variations across the provisions exist and have 
not been presented in these summaries. Moreover, not every FTA reviewed 
contained every provision summarized below. 

Compulsory Licensing: Generally, provisions on compulsory licensing 
limit the ability of a country to issue a compulsory license to a few 
specific scenarios: to remedy anticompetitive practices in cases of 
public noncommercial use, in cases of national emergency, or other 
circumstances of extreme urgency. 

Parallel Imports: Generally, provisions on parallel importation require 
the country to preserve the patent owner's exclusive right to sell or 
import its product in the country in a variety of contexts. 

Data Exclusivity: Generally, data exclusivity provisions state that a 
generic company cannot obtain marketing approval based on the safety 
and efficacy data of the innovator company for a period of at least 5 
years from the date marketing approval was granted to the innovator. 
Thus, this provision provides the innovator 5 years of effective 
marketing exclusivity, unless the generic firm produces its own safety 
and efficacy data with new drug trials. 

Patent Term Extensions: Generally, patent term extension provisions 
require the country to provide a patent term extension to the patent 
owner to compensate for unreasonable delays in granting the patent, or 
for unreasonable curtailment of the effective patent term as a result 
of the marketing approval process. 

Patent Linkage: Generally, provisions on patent linkage establish a 
relationship between the market approval process of generic drugs and 
the patent status of the originator product. Under this relationship, 
the governmental body responsible for granting market approval prevents 
third parties from making or selling copies of patented products 
without the authorization of the patent holder by withholding marketing 
approval until either the expiration of the patent or a determination 
by a governmental body, either executive or judicial, that the patents 
are either not infringed, invalid or unenforceable. In addition, the 
identity of the generic company requesting marketing approval must be 
made available to the patent owner. 

Patent term extensions and patent linkage are two examples of 
pharmaceutical-related IP provisions the United States negotiates for 
in FTAs that go beyond the minimum obligations in the TRIPS agreement. 
TRIPS article 33, which lays out the term of protection for a patented 
product, states that "the term of protection available shall not end 
before the expiration of a period of twenty years counted from the 
filing date." There is no mention of patent term extensions to make up 
for delays in the patent or marketing approval process in the TRIPS 
agreement. Nevertheless, these patent term extension provisions exist 
in U.S. law[Footnote 24] and according to USTR officials are negotiated 
by USTR in FTAs. In addition, there is no mention of coordination 
between the health regulatory authority and the patent granting office, 
known as patent linkage, in the TRIPS agreement. However, U.S. law does 
establish linkage between the FDA drug approval process of generics and 
the patent status of the originator product,[Footnote 25] and USTR 
believes that such linkage is important to restrict marketing of 
infringing copies of patented drug products. 

Whether FTA provisions on data exclusivity go beyond TRIPS is less 
clear. TRIPS article 39(3) states that members who require the 
submission of undisclosed test data as a condition of marketing 
approval for a pharmaceutical or agricultural chemical product shall 
protect the data from unfair commercial use and disclosure. 

TRIPS Article 39(3): 

Members, when requiring, as a condition of approving the marketing of 
pharmaceutical or of agricultural chemical products which utilize new 
chemical entities, the submission of undisclosed test or other data, 
the origination of which involves a considerable effort, shall protect 
such data against unfair commercial use. In addition, Members shall 
protect such data against disclosure, except where necessary to protect 
the public, or unless steps are taken to ensure that the data are 
protected against unfair commercial use. 

There are different interpretations of the obligations under TRIPS 
39(3), and exactly what practices can be considered a fulfillment of 
this obligation. One interpretation of TRIPS 39(3) requires members to 
grant the originator of the data a period of exclusive use similar to 
that provided by data exclusivity laws in the United States. Under this 
interpretation, FTA provisions do not go beyond TRIPS. Others do not 
believe that Article 39(3) of TRIPS confers exclusive rights, but 
instead simply requires countries to prevent third parties from using 
the originators' data for unfair commercial purposes. This 
interpretation suggests that the FTA provision goes beyond the TRIPS 
requirement. 

USTR Has Made Limited Concessions on Doha Declaration Flexibilities: 

USTR officials stated that they did not change the initial demands USTR 
makes in FTA negotiations as a result of the Doha Declaration. However, 
they argued that USTR follows TPA guidance to respect the Doha 
Declaration by making concessions during negotiations with what it 
considers to be developing countries on the two TRIPS flexibilities 
specifically mentioned in the declaration. USTR officials told us that 
when developing country trading partners raise concerns during FTA 
negotiations about provisions that would restrict the use of parallel 
imports or compulsory licensing, USTR ultimately backs off and removes 
them from the proposed text; however, they stated that no such 
concessions were made for countries that USTR considered developed 
countries. A USTR official said that developed countries have more 
tools and resources with which to deal with public health situations 
and that they should not have to revert to such extraordinary measures 
outside of the cases specified in FTA provisions, such as national 
emergencies. Restricting these concessions to developing countries is 
in line with USTR's belief that the Doha Declaration is intended to 
apply primarily to developing countries with limited resources. 

USTR also attaches side letters on public health to FTAs with 
developing countries.[Footnote 26] Our analysis in figure 2 shows that 
7 of the 11 agreements include a side letter or understandings on 
public health.[Footnote 27] USTR officials noted that they use the side 
letters to further clarify that the provisions of the agreement leave 
intact a series of methods a country can use to respond to public 
health emergencies.[Footnote 28] However, according to a USTR official, 
these side letters do not create exceptions to the provisions in the 
FTA. 

Figure 2: FTA Pharmaceutical-Related IP Provisions and Side Letters 
Matrix: 

This figure is a chart showing the FTS pharmaceutical-related IP 
provisions and side letters matrix. 

[See PDF for image] 

Source: GAO analysis, International Monetary Fund, (IMF), and United 
Nations (UN). 

Note: Per capita income based on purchasing power parity (PPP) exchange 
rate is from International Monetary Fund's staff estimates for 2006. 
Per capita income for CAFTA-DA is an average for the region, which is 
total PPP-based Gross Domestic Product (GDP) for the region divided by 
total population for the region using UN estimates. 

[End of figure] 

USTR told us that some differences in the IP provisions among FTAs 
represented accommodations made to countries raising specific concerns 
during negotiations. For instance, USTR officials stated that, in the 
Central America-Dominican Republic-United States Free Trade Agreement 
(CAFTA-DR), a transition period was included for the implementation of 
patent term extensions. In the CAFTA-DR agreement, USTR dropped a 
proposal for data exclusivity protection on new uses of previously 
discovered chemical entities, and instead left data exclusivity in 
place only for new chemical entities. In addition, USTR revised the 
proposed provision on patentable subject matter in the Oman agreement 
in order to exclude plants and animals from patent protection in 
response to Oman's concerns. USTR officials said that most concerns 
raised during negotiations regarding data exclusivity and patent 
linkage were not couched as health concerns, but rather as unease 
related to administrative burden or implementation concerns. When these 
types of implementation concerns are raised during negotiations, USTR 
said it consults with the U.S. agencies responsible for implementing 
those provisions in the United States, PTO, and FDA. 

USTR officials stated that USTR considers the remaining pharmaceutical 
IP provisions on data exclusivity, patent linkage, and patent term 
extension a central part of its strategy of pursuing the first two IP 
negotiating objectives, while it does not see these provisions as being 
specifically addressed by the Doha Declaration. Therefore, USTR 
officials noted that these three provisions are pursued universally by 
USTR in all of its FTAs. USTR officials noted that these provisions are 
very important for providing protection similar to that found in U.S. 
law and for maintaining incentives for the pharmaceutical industry. 
USTR officials explained that USTR does not believe that these three 
provisions are considered flexibilities under the Doha Declaration, and 
therefore sees no conflict between pursuing them and respecting the 
Doha Declaration. USTR officials noted that USTR maintains that these 
provisions do not restrict a country's ability to protect public 
health. 

The pattern of IP provisions negotiated in the 11 FTAs completed to 
date confirms USTR's stated negotiating strategy. Figure 2 demonstrates 
that data exclusivity, patent term extension, and patent linkage 
provisions are found in all 11 of the FTAs concluded under TPA, 
regardless of the development level in the country. Pursuing these 
provisions also confirms USTR's stated strategy of seeking high IP 
standards related to pharmaceuticals in trade negotiations. On the 
other hand, figure 2 indicates that IP provisions on compulsory 
licensing are found in only 2 of 11 completed FTAs, those with 
Singapore and Australia, both of which USTR considered developed 
countries. Only 3 of 11 FTAs--Singapore, Australia, and Morocco-- 
contain provisions on parallel imports. Although Morocco is considered 
a developing country, USTR officials explained that Morocco decided in 
2000, well before the onset of negotiations, not to permit parallel 
imports. Therefore, USTR officials stated that the parallel importation 
provision reflected what was already provided in Moroccan law. 

The Pharmaceutical Industry Supports USTR's Insistence on Data 
Exclusivity, Patent Linkage, and Patent Term Extensions, but Others 
Contend These Provisions Contradict the Principles of the Declaration: 

Reactions to USTR's approach to pursuing its TPA objectives in 
negotiating FTAs have been mixed, with controversy centered on the 
three key provisions of data exclusivity, patent linkage, and patent 
term extensions. The pharmaceutical industry stated that it supports 
the inclusion of these provisions in FTAs because it believes they 
maintain incentives for research and development. However, some experts 
and public health advocates have raised concerns that USTR's approach 
delays generic competition and reduces access to medicines. Therefore, 
they believe that USTR's strategy violates the principles and goal of 
the Doha Declaration. 

The Pharmaceutical Industry Considers Data Exclusivity, Patent Linkage, 
and Patent Term Extensions Key Provisions: 

Pharmaceutical industry representatives stated that data exclusivity is 
a very important IP protection that provides incentives to innovate and 
invest in certain markets. Data exclusivity grants a company the 
exclusive use of its safety and efficacy test data, necessary to obtain 
marketing approval, for a fixed period after the marketing launch. Data 
exclusivity is one method by which the innovator company can recoup the 
costs involved with conducting clinical tests necessary for marketing 
approval, as well as the considerable costs associated with developing 
a new drug. Industry representatives explained that they consider 
patent protection and data exclusivity to be separate but complementary 
protections. Both can generally provide a period of exclusivity. 
Consequently, data exclusivity may effectively grant another layer of 
market exclusivity for the new product. Figure 3 contains three 
scenarios of how the periods of data exclusivity and patent protection 
can interact to create market exclusivity under U.S. law. 

Figure 3: Data Exclusivity and Patent Protection, Three Possible 
Scenarios: 

This figure is a chart detailing data exclusivity and patent protection 
for three different scenarios. 

[See PDF for image] 

Source: GAO analysis. 

[End of figure] 

Some time after the initial drug development takes place, the company 
applies for a patent and the 20-year patent term begins. During the 
patent term, the company completes all of the drug trials necessary to 
obtain the safety and efficacy data needed for marketing approval by 
the FDA. After approval is granted, the company can begin marketing its 
drug, and the set period of data exclusivity period begins. Industry 
representatives noted that the data exclusivity period generally is 
concurrent with the patent period and therefore does not add any 
additional period of effective market exclusivity, as shown in the 
first scenario in figure 3. However, as shown in the second scenario, 
if marketing approval is obtained further into the patent term, the 5- 
year data exclusivity period, which begins when marketing approval is 
granted, can extend beyond the term of the patent. As shown in the 
third scenario, when no patent protection exists, data exclusivity 
effectively provides the entire market exclusivity period. 

Pharmaceutical industry representatives stated that the first scenario 
is the most typical, with the data exclusivity running concurrently 
with patent protection. However, they noted that there are many 
instances in which companies do not obtain patents on their products 
(particularly for small markets), or patent protection is inadequate or 
poorly enforced. In these situations, data exclusivity ensures the 
innovator company a 5-year period of market exclusivity. The 
pharmaceutical industry believes that, in cases in which there is no 
patent or very little patent life remains when the drug first enters 
the market, data exclusivity is critical because without an effective 
market exclusivity period, incentives to research and develop new drugs 
are diminished. 

Pharmaceutical industry representatives have also advocated for patent 
term extensions in FTAs. It is common for a substantial portion of the 
patent life to be spent running drug trials. Therefore, the industry 
argues that patent term extensions ensure that innovators get enough 
time to recoup their costs and maintain the incentives for future 
innovation. In addition, industry representatives noted that, in many 
developing countries, the delays associated with getting a patent or 
obtaining marketing approval for a new drug can be far more extensive 
than in the United States. They argue that, under these circumstances, 
it is even more critical that a safeguard mechanism exists to ensure 
that these delays do not undermine the intentions of patent protection. 

Patent linkage is also considered important by the pharmaceutical 
industry. Patent linkage provisions in the FTAs provide for delay of 
marketing approval if a generic drug product is covered by an unexpired 
patent. Pharmaceutical companies claim that generic companies routinely 
launch patent-infringing products during the life of a patent in many 
developing countries and that patent linkage would help to minimize 
this problem. 

Some Experts and NGOs Believe USTR's Continued Promotion of Data 
Exclusivity, Patent Term Extensions, and Patent Linkage Conflicts with 
the Principles of the Doha Declaration: 

Some experts and NGOs believe that these provisions impair access to 
medicines and therefore are contrary to the "spirit" of the Doha 
Declaration and TPA guidance. These NGOs, academics, and generic 
pharmaceutical producers believe that these provisions limit generic 
competition, thereby maintaining high prices for pharmaceutical 
products, ultimately impairing access to medicines. These concerns have 
been extensively discussed and documented by academics, international 
organizations, think tanks, NGOs, and public health groups. Since many 
FTA partners implemented these pharmaceutical-related IP provisions for 
the first time very recently, it is difficult to identify the tangible 
effect of these provisions. However, these groups believe that the 
inclusion of these provisions has the potential to decrease public 
health and therefore is contrary to the spirit and principles and goal 
of the Doha Declaration. 

Many NGOs argue that the data exclusivity provisions included in U.S. 
FTAs will damage access to medicines and public health and worry that 
there might be instances where the data exclusivity period could extend 
beyond the length of the patent term, as in figure 3, scenario 2. This 
data exclusivity period effectively delays entry of generics onto the 
market, thereby maintaining monopoly prices for a longer period of 
time. While some NGOs recognize that it would be rare for the data 
exclusivity period to extend beyond the patent term, they are worried 
that if this situation occurs, generic competition will be delayed 
because of the presence of data exclusivity. In addition, where the 
innovator of a new drug did not obtain a patent in that country, either 
because it did not apply or because the new drug was not patentable, 
data exclusivity will effectively give the innovator a patent-like 
period of marketing exclusivity for the entire period of data 
exclusivity, from the time marketing approval is granted (see figure 3, 
scenario 3). NGOs are also concerned that data exclusivity provisions 
might prevent the marketing of generic drugs produced under a 
compulsory license. For instance, if a compulsory license is granted to 
a generic producer, but that producer is not able to rely on the data 
generated by the innovator company to obtain needed marketing approval, 
it will not be possible to distribute the drugs under a compulsory 
license. 

Some experts and NGOs are also concerned that variations in the data 
exclusivity periods across countries could further delay generic entry. 
An FTA partner country must normally provide 5 years of data 
exclusivity to the innovator once the product receives marketing 
approval.[Footnote 29] If the innovator waited to apply for marketing 
approval in the FTA partner country, thereby delaying the start date of 
its market exclusivity period, it would effectively extend the overall 
market exclusivity period beyond the intended 5 years. Some FTAs have 
addressed this issue by specifying that a country may require the 
innovator to apply for marketing approval in its country within a 
specified period of time. For instance, in the CAFTA-DR agreement, at 
their request, a Party may require that the innovator seek marketing 
approval in that Party within 5 years after obtaining marketing 
approval in any other territory in order to receive data exclusivity. 
This way, the innovator company can only delay the start date of its 
data exclusivity period by a fixed period of time. 

Patent term extension provisions in FTAs have also led to questions 
about their effect on access to medicines. Many NGOs and generic 
pharmaceutical producers believe that the 20-year patent term in TRIPS 
creates a balance between access and innovation and that extending the 
patent period would have a detrimental effect on generic competition. 
They are also concerned that the patent term extension provisions in 
U.S. FTAs do not contain the same limits present in U.S. law. For 
instance, under U.S. law, innovators cannot receive more than 14 years 
of patent protection through a patent term extension after they have 
received market approval, and in any case, the maximum period of 
extension determined on the basis of the regulatory review period 
cannot exceed 5 years. This limit on patent term extensions is not 
present in FTAs. 

Some also assert that patent linkage might negatively affect access to 
medicines. The patent linkage process in the United States involves 
numerous steps and actors, designed to enable resolution of patent 
disputes before marketing approval is granted for a generic drug 
product. As shown in figure 4, this linkage system places the burden on 
the private companies, not the regulatory authority, to monitor the 
patent system. 

Figure 4: Patent Linkage Process in the United States: 

This figure is a chart showing the patent linkage process in the United 
States. 

[See PDF for image] 

Source: GAO analysis. 

[End of figure] 

Specifically, the U.S. patent linkage system puts the onus on the 
generic company producer to provide information on the applicability of 
an existing patent to the drug product for which it is seeking 
marketing approval. If the generic company decides to challenge the 
patent, it must notify the patent holder within a specified period of 
time in order to give the patent holder the chance to sue and defend 
the patent in the courts. When the patent litigation is resolved, the 
FDA can grant marketing approval to the generic company if the patent 
is overturned, and may be obliged to wait until the patent expires if 
the generic drug product is found to infringe the patent and the patent 
is not found to be invalid. NGOs and generic pharmaceutical producers 
are concerned that developing countries do not have the same set of 
protocols laid out in the FTA agreement or in their laws, and that this 
will ultimately affect access to medicines. Generic pharmaceutical 
representatives argue that countries might experience regular abuses 
and delays in the introduction of generic drugs if they are unable to 
institute an effective linkage process. 

Congressional Concern over IP Provisions and Access to Medicines 
Addressed in Bipartisan Trade Deal: 

Certain Members of Congress have expressed concern over the 
pharmaceutical-related IP provisions in FTAs with developing countries, 
and this concern was recently addressed through a bipartisan compromise 
between Congress and the administration. Through letters and 
correspondence with USTR, certain Members emphasized the need to better 
balance IP protection for pharmaceuticals with the promotion of access 
to affordable medicines, including through robust generic competition. 
These Members expressed unease over the balance achieved in the FTAs 
negotiated by USTR to date--specifically, the impact of the 
pharmaceutical-related IP provisions in FTAs on developing countries. 
These Members urged USTR to ensure that the FTA provisions do not 
restrict the availability of generic competition and put affordable 
health care at risk. In response to these concerns, in May 2007, 
Members of the congressional leadership agreed on a bipartisan 
compromise with the administration to revise four of the recently 
negotiated FTAs, in order to alter provisions pertaining to a variety 
of areas, including IP provisions and access to medicines. 

The bipartisan trade deal reached between Congress and the 
administration in May 2007 stipulated that certain disputed IP 
provisions in FTAs with Peru, Colombia, Panama, and Korea be revised 
prior to submission of the agreements for congressional approval, by 
USTR and the trading partners.[Footnote 30] According to USTR 
officials, the agreement preserves a strong overall level of IP 
protection in the FTAs, while incorporating flexibilities aimed at 
ensuring that trading partners are able to achieve the appropriate 
balance between innovation and promoting access to medicines. 
Specifically, USTR revised the FTAs with Peru, Colombia, Panama, and 
Korea to include a reference to the Doha Declaration and the ability of 
each country to protect public health in the body of the agreement, 
instead of in a side letter. In addition, the data exclusivity 
provision in each of these agreements was revised to provide an 
exception for public health. 

The agreements with Peru, Colombia, and Panama were revised further to 
alter the language of provisions on patent term extensions, patent 
linkage, and data exclusivity. A USTR official stated that USTR and 
Congress decided that these additional changes would not be applied to 
the Korea FTA in view of Korea's relatively higher level of economic 
development. These additional changes to the Peru, Colombia, and Panama 
agreements revised the provisions on patent term extensions and patent 
linkage in order to provide more flexibility for trading partners in 
implementing these provisions. In addition, the data exclusivity 
provision was revised further to ensure that, in some circumstances, 
the data exclusivity period in those countries would not extend beyond 
the period of data exclusivity provided in the United States. These 
changes were renegotiated and finalized by USTR in June 2007. 

USTR Is Implementing and Overseeing Trade Agreements in a Manner 
Consistent with Its Overall Approach of Promoting High Standards 
concerning IP Rights: 

USTR's approach to implementing and overseeing pharmaceutical-related 
IP provisions is consistent with its overall negotiating strategy 
pursued in FTAs. Before a signed FTA can go into force, the President 
determines, with USTR's advice, whether the FTA partner has met all 
obligations, including, when appropriate, changes in laws and 
regulations. As part of this process of advising the President on the 
determination that he is required to make under U.S. implementation 
legislation for FTAs, USTR has vigorously pursued FTA partners' 
implementation of pharmaceutical provisions related to data 
exclusivity, patent term extension, and patent linkage. In fact, in 
some cases, USTR has continued to work with countries after the 
agreement has entered in force. For example, USTR is still working with 
Chile to ensure that its data exclusivity provisions are implemented in 
a manner consistent with the Chile FTA. 

In its broader role of annually identifying countries that deny 
adequate and effective protection of IP rights, USTR has frequently 
raised data protection and patent linkage, in keeping with its strategy 
of gaining high levels of IP protection for pharmaceutical products, 
similar to U.S. law. With regard to the Doha Declaration flexibilities, 
USTR has not generally pressed for restrictions on compulsory licensing 
and parallel imports in its Special 301 reports. Furthermore, USTR has 
had a measured response to cases to date of countries actually issuing 
compulsory licenses. For example, when Thailand recently issued a 
compulsory license, USTR acknowledged its right to do so and thus far 
is restricting its criticism to a lack of transparency in the process. 

USTR Reviews Compliance with FTA Obligations before Agreements Enter 
into Force: 

One USTR official noted that USTR oversees FTA partners' implementation 
of the pharmaceutical-related IP provisions agreed to in the FTA in 
order to ensure that the negotiated standards are implemented as 
intended. In order for an agreement to enter into force, the President 
determines with the advice of USTR whether the FTA partner has met all 
obligations. A USTR official explained that USTR works with the trading 
partner to ensure that its IP laws are aligned with the provisions 
agreed to in the FTA. The USTR official further explained that, at the 
start of the implementation process, the trading partner provides USTR 
a comprehensive list of its laws related to each provision in the IP 
chapter of the FTA. The trading partner also provides USTR a list 
detailing the intended legal changes necessary to bring its laws into 
compliance with the agreement. USTR reviews the laws and proposed 
changes and provides the trading partner with comments regarding their 
degree of compliance. USTR monitors the changes in the other country, 
and has numerous exchanges with the trading partner on any legal 
changes necessary. One USTR official stated that they are careful to 
ensure that the agreement is implemented exactly as it was negotiated. 
For example, in response to Guatemala's proposal to have an exception 
to data exclusivity written into its laws, USTR insisted that this 
exception undercut the original obligations, and it was therefore 
unwilling to accept the change. 

A USTR official explained that when the legal changes are complete and 
USTR is comfortable with the new legislation, USTR makes a 
recommendation to the President for the agreement to enter into force. 
The administration then makes a determination about the legal 
compliance before the agreement can officially enter into force. USTR 
and other agencies also provide technical assistance on implementing 
related IP provisions to FTA partner and nonpartner governments. (See 
appendix II.) 

USTR Vigorously Pursues Implementation of Data Exclusivity, Patent Term 
Extension, and Patent Linkage: 

USTR focuses on a wide range of IP provisions including data 
exclusivity, patent term extensions, and patent linkage during the FTA 
implementation phase to ensure that U.S. trading partners are properly 
implementing and enforcing pharmaceutical-related IP provisions. In 
2005, Chile reformed its data protection regime; however, a USTR 
official stated that USTR has continued to monitor Chile's 
implementation of data exclusivity in response to concerns raised by 
the pharmaceutical industry. Specifically, USTR officials noted that 
Chile had added a requirement that, in order to receive data 
exclusivity, companies must apply for marketing approval within a year 
of doing so in other countries. USTR is also monitoring Chile on 
specific issues with regard to the implementation of patent linkage and 
patent term extensions. In particular, USTR is responding to concerns 
that the Chilean health authorities issued a number of marketing 
approvals of generic versions of drugs still under patent. Chile 
appears to have no provision that would prevent such an approval from 
being issued during the patent term. In addition, USTR noted that Chile 
has yet to implement a law that would enact patent term extensions to 
compensate for delays in marketing approval. 

USTR Has Focused Attention on Data Protection and Patent Linkage in Its 
Special 301 Report: 

USTR officials noted that USTR regards the Special 301 report, which is 
subject to different statutory requirements distinct from TPA,[Footnote 
31] as an important tool for overseeing and evaluating the 
implementation and adequacy of IP protection worldwide. USTR officials 
explained that USTR considers all items that are related to the 
effectiveness and adequacy of IP protection in its Special 301 report. 
They noted that in the Special 301 report there are considerations 
relevant to adequacy and effectiveness that sometimes go beyond the 
minimum standards laid out in TRIPS. In fact, there are many examples 
of situations discussed in the Special 301 reports that are not 
specifically part of TRIPS. Thus, the Special 301 report tracks 
progress of WTO member implementation of TRIPS and trading partner 
implementation of FTAs, as well as how adequately countries are 
protecting IP rights overall. While the Special 301 report focuses on a 
wide range of IP protection issues related to copyrights, patents, and 
trademarks, including piracy, counterfeiting, and enforcement, our 
analysis focuses only on the pharmaceutical-related issues discussed in 
this report. Thus, this analysis focuses only on the countries listed 
on the Special 301 report for which pharmaceutical-related issues were 
mentioned as a concern, which represent only a subset of the issues 
discussed and the total number of countries listed in the Special 301 
reports over the years 2000-2007. (See table 1.) 

Table 1: Countries Listed in the Special 301 Report with Mention of 
Pharmaceutical-related Issues Compared to All Countries Listed (2000- 
2007): 

Total countries listed with mention of pharmaceutical-related issues; 
2000: 17; 
2001: 21; 
2002: 21; 
2003: 23; 
2004: 37; 
2005: 32; 
2006: 31; 
2007: 27. 

Total countries listed for all issues; 
2000: 56; 
2001: 50; 
2002: 51; 
2003: 50; 
2004: 51; 
2005: 52; 
2006: 48; 
2007: 43. 

Source: GAO analysis of Special 301 Reports. 

[End of table] 

Consistent with its emphasis in FTAs, our analysis of the Special 301 
reports indicates that USTR focuses heavily on data protection in its 
annual Special 301 reports. For countries listed in the Special 301 
reports over the period 2000 through 2007 for whom pharmaceuticals was 
cited as an issue of concern, data protection was mentioned in almost 
every case. In fact, data protection is the most frequently mentioned 
of all pharmaceutical issues in the Special 301 reports over that 8- 
year period, appearing a total of 173 times. (See figure 5.) 

Figure 5: Number of Pharmaceutical Provision Mentions in Special 301 
Reports (2000-2007): 

This is a bar chart showing the number of pharmaceutical provision 
mentions in Special 301 reports. The X axis is the number, 0 to 70, and 
the Y axis represents the year, 2001 to 2007. 

[See PDF for image] 

Source: GAO analysis of Special 301 reports. 

[End of figure] 

USTR's focus on patent linkage is also similar to its negotiating 
strategy in FTAs. The second most frequently mentioned pharmaceutical 
provision in Special 301 reports from 2000 through 2007 is patent 
linkage, which is mentioned 56 times. Pharmaceutical counterfeiting is 
also discussed somewhat regularly in the Special 301 reports over this 
period, but not as frequently as data protection or patent linkage. 

USTR Has Only Infrequently Mentioned Compulsory Licensing or Parallel 
Imports in Special 301 Reports: 

There is limited mention of compulsory licensing or parallel imports in 
the Special 301 reports. In the Special 301 reports from 2000 through 
2007, compulsory licensing regarding pharmaceuticals is only mentioned 
nine times, while parallel importing related to pharmaceuticals is 
mentioned only three times. While the IP objectives in TPA do not 
control the coverage of the Special 301 reports, USTR's approach to 
these two provisions referenced in the Doha Declaration seems similar. 
USTR officials explained that USTR recognizes that the TRIPS agreement 
allows countries some flexibility regarding the use of compulsory 
licenses and parallel imports when protecting public health. By not 
mentioning these provisions frequently in the Special 301 report, USTR 
acknowledges the existence of these flexibilities, as highlighted in 
the Doha Declaration. However, USTR officials also noted that the 
infrequency with which these provisions are mentioned is due to the 
fact that the trading partners rarely make use of these flexibilities. 

USTR Has Acknowledged Thailand's Right to Issue a Compulsory License, 
but Criticized Its Lack of Transparency: 

Thailand recently issued a compulsory license on a pharmaceutical 
product, citing a public health need. In November 2006, Thailand issued 
a compulsory license on a drug for treating HIV/AIDS, followed by two 
more compulsory licenses issued in early 2007 for another HIV/AIDS drug 
and a heart disease medication. These compulsory licenses are 
government-use licenses issued under Thai law. The government of 
Thailand announced that these decisions were aimed at improving access 
to essential medicines and public health in Thailand. In addition, 
Brazil issued a compulsory license for one of the same HIV/AIDS drugs 
in May 2007. 

Public reaction to Thailand's and Brazil's actions has been mixed, with 
some defending their right to issue a compulsory license and others 
criticizing their actions as irresponsible. For instance, the 
pharmaceutical industry believes that the compulsory licenses were 
unnecessary and will ultimately negatively affect drug innovation, and 
is concerned the licenses will set a precedent for similar actions. 
However, many NGOs stated that they support countries like Thailand and 
Brazil using their right to issue compulsory licenses in order to 
improve access to medicines in their countries. 

USTR's response to Thailand's and Brazil's issuance of compulsory 
licenses has been more measured. USTR officials told us that in all 
speeches, letters, and private conversations, USTR tried to recognize 
and convey that Thailand has the ability to issue compulsory licenses. 
However, they noted that, when issuing a compulsory license, it is 
important that the issuer engage with all of the affected stakeholders, 
including patient groups and patent holders, about the best way to meet 
public health needs. In both the Brazil and Thailand cases, USTR has 
tried to focus on the procedures and processes followed by the 
governments, rather than on the validity of the licenses. USTR 
officials noted that, in general, they are reluctant to insert 
themselves into price negotiations between governments and the 
pharmaceutical industry, but that they will advocate for transparency. 

Although USTR mentioned both the Thai and possible Brazil cases of 
compulsory licensing in the 2007 Special 301 report, the report limited 
its criticism to issues of good governance. USTR officials noted that, 
at the time the report was issued, all three compulsory licenses had 
already been issued by Thailand, and that they believed the Brazilian 
compulsory license was imminent. For example, in the Thai case, USTR 
was careful in its report to recognize a country's ability to issue 
compulsory licenses subject to WTO rules and the country's domestic 
laws. However, it expressed concern about what it considered to be the 
lack of transparency exhibited in Thailand, and emphasized the need for 
such transparency in discussions with all relevant stakeholders in 
Brazil. 

USTR officials stated that the decision to elevate Thailand from the 
watch list in its 2006 Special 301 report to the priority watch list in 
2007 was based on broad IP concerns, not solely on its compulsory 
license decision. They explained that there were many major IP concerns 
in Thailand and many complaints that fueled their decision. In 
addition, they noted that, while Thailand was raised to the priority 
watch list, Brazil, which was also about to issue a compulsory license 
at the time, was lowered from the priority watch list to the watch 
list. They said that Brazil's standing improved due to impressive work 
in other areas of IP enforcement, and that the imminent compulsory 
license did not alter USTR's decision to improve Brazil's standing. 
Nevertheless, in its 2007 Special 301 report, USTR noted that it will 
conduct an out-of-cycle review to evaluate Brazil's progress in other 
areas and encourage additional progress in areas of outstanding 
concern. 

Public Health Input on IP Rights Has Been Limited in U.S. Trade 
Negotiations: 

Since TPA, public health input into U.S. trade negotiations has been 
limited. In negotiating trade agreements under TPA, the President must 
seek advice and information from executive departments and the public 
and private sectors.[Footnote 32] Although U.S. agencies generally 
support USTR's negotiations approach, interagency input on U.S. trade 
negotiations has not addressed the public health implications of IP 
pharmaceutical provisions negotiated under TPA and has been primarily 
technical in nature. For instance, HHS, the lead U.S. agency on global 
public health and social welfare issues, endorses USTR's negotiating 
approach that strong IP protection promotes public health and access to 
medicines. However, HHS advice during trade negotiations has generally 
concentrated on technical advice from one of its subagencies, the Food 
and Drug Administration (FDA), to ensure that FTA provisions related to 
pharmaceuticals do not violate U.S. law and are consistent with U.S. 
health regulations. HHS has not addressed policy questions related to 
whether FTA provisions might affect public health in FTA partner 
countries. Within the formal private sector advisory system, two public 
health representatives were recently added to two private sector 
Industry Trade Advisory Committees (ITACs) after USTR had concluded 
nine trade agreements. These two committees are respectively composed 
of 20 and 33 private sector representatives from the pharmaceutical and 
other industry sectors. USTR has obtained some public health 
perspectives from stakeholders through other formal and informal means, 
including public hearings, Federal Register comments, and written 
correspondence. 

The Departments of Health and Human Services and State Endorse the View 
that IP Protection Supports Access to Medicine: 

HHS officials told us they support the USTR position concerning the 
Doha Declaration and agree with USTR's view that strong IP protection 
promotes innovation and access to medicines. The agency supports the 
administration's vision for both global health and overall U.S. foreign 
policy, and HHS's Office of Global Health Affairs (OGHA) is the U.S. 
focal point for policy coordination across multilateral health and 
science organizations. According to OGHA officials, the FDA's generic 
drug preapproval process is a key example of HHS efforts to balance 
high IP standards and access to medicines. Officials stated that the 
FDA generic drug preapproval process exhibits HHS support for creating 
a market for high quality generics that meet international standards. 
The agency has also supported USTR's interpretation of TRIPS 
flexibilities in multilateral discussions about IP and public health, 
such as those held at WHO. According to officials, HHS's OGHA 
coordinates U.S. policy inputs and interests as they pertain to IP 
rights and public health in WHO, ensures that the U.S. policy position 
at WHO meetings reflects administration priorities, and works with USTR 
and other U.S. agencies to advance U.S. IP and public health interests 
internationally. Most recently, HHS hosted the newly formed WHO 
Commission on Intellectual Property Rights, Innovation, and Public 
Health, and has been the lead federal agency in coordinating the U.S. 
response across agencies, including USTR, to a 2006 WHO report on IP 
rights and public health. 

State Department officials also support the USTR's view that IP 
protection is important for promoting access to medicines. However, 
State Department officials said they principally demonstrate the U.S. 
strategy to balance IP rights and public health through various 
programs and initiatives. For example, State's Office of the Global 
AIDS Coordinator (OGAC) works with several other agencies, including 
HHS, to implement the President's Emergency Plan for AIDS Relief 
(PEPFAR), which has programs in over 120 countries and a special focus 
on 15 countries that are primarily located in sub-Saharan Africa. OGAC 
and USAID also worked with the FDA to develop the generic drug 
preapproval process to support the purchase of low priced, high quality 
drugs for the PEPFAR program. This effort resulted in the preapproval 
of over 50 generic antiretrovirals (ARV) to date and almost $2 million 
in savings on generic drug purchases in 2006. In addition, USAID 
developed a centrally managed contract, the Partnership for Supply 
Chain Management, in order to work with generic companies to address 
drug supply chain challenges and increase research and development for 
a steady supply of ARVs in developing countries. 

Interagency IP Rights and Public Health Perspective Is Limited to 
Technical Advice: 

USTR has obtained some input on IP rights and public health in trade 
negotiations through the formal interagency trade policy process, but 
public health perspectives on USTR's negotiating approach to 
pharmaceutical issues in FTA negotiations are primarily technical in 
nature and have not included an examination of the public health 
impacts of FTA provisions.[Footnote 33] USTR coordinated with HHS when 
it first began to formulate its basic policy goals for negotiating 
FTAs, and HHS has had the opportunity to review draft FTA texts through 
the interagency advisory system. However, HHS has had limited 
involvement in the actual trade negotiations.[Footnote 34] According to 
USTR, most public health issues are worked out in advance of the 
negotiations. HHS and USTR occasionally convene an interagency working 
group to discuss IP rights and public health issues that arise at WHO 
or in other multilateral fora. 

Although USTR routinely briefs HHS after each round of FTA 
negotiations, OGHA officials stated that the health agency's role in 
trade, IP rights, and the negotiation of pharmaceutical-related IP 
provisions in FTAs has primarily involved providing technical expertise 
through its subagencies when requested by USTR. For example, FDA 
officials stated that their overall mission is generally not related to 
trade, but instead focuses on regulatory matters as they affect public 
health. The agency offers technical advice to USTR during negotiations 
to ensure that FTA provisions related to pharmaceuticals do not violate 
U.S. law and are consistent with U.S. health regulations. For instance, 
the FDA has provided a perspective on regulatory issues in FTAs to 
ensure that provisions do not have implications for U.S. regulatory 
programs. HHS officials also stated that they have no role in assisting 
countries in pursuing objectives of the Doha Declaration. Although they 
have good working relationships with the health ministries of many 
countries, conversations generally focus on technical advice with 
regard to regulatory issues. For example, subagencies such as the FDA 
may provide regulatory advice and guidance to FTA partners, during 
negotiations or FTA implementation, on the regulatory responsibilities 
associated with various IP provisions, the manner in which provisions 
function in the United States, and how U.S. regulatory systems operate. 

OGHA officials told us they are satisfied with HHS's role and input in 
the interagency advisory process and the public health considerations 
provided in U.S. trade negotiations and policy, and the office does not 
believe IP provisions in FTAs restrict access to medicines. However, 
there is little evidence that USTR consulted with HHS or OGHA regarding 
FTA partner countries' concerns about the potential impact on public 
health of specific pharmaceutical provisions in FTAs since the Doha 
Declaration and the Trade Promotion Authority Act of 2002 were agreed 
upon, although the HHS OGHA's mission includes promoting the health of 
the world's population. OGHA officials noted that USTR has never 
approached them to discuss such country concerns about public health. 
According to USTR officials, USTR does not generally talk to HHS about 
countries' concerns about the public health impact of FTA provisions, 
but instead relies on the countries themselves to raise concerns, since 
developing countries know their own public health systems and needs 
better than any U.S. agency would. Similarly, HHS has not been asked by 
USTR to conduct analyses of the impacts of FTA provisions on regulatory 
institutions in partner countries, and HHS has not provided such an 
assessment. There is also little evidence that the agencies have 
determined whether the FTAs affect public health, either positively or 
negatively, and HHS officials stated they do not have the technical 
capacity to do so. 

Similarly, the PTO Office of International Affairs is involved in the 
FTA negotiations process as a technical advisor under its statutory 
authority regarding IP issues. The office advises USTR on WTO issues 
and FTAs, meets with USTR to discuss strategy before each round of FTA 
negotiations, and participates in the negotiations. For example, USTR 
may ask PTO's opinion about the use of a particular technical term. PTO 
also provides technical advice and training to FTA partner countries on 
pharmaceutical IP provisions during FTA negotiations, and provides 
clarification on the interpretation of negotiated provisions. For 
instance, in the CAFTA-DR negotiations, partner countries asked PTO to 
explain data exclusivity in further detail and how the provision 
functions in the United States. According to officials, PTO never 
states that the U.S. method of implementing a particular provision is 
the only way to implement or fulfill a particular FTA obligation, but 
instead simply provides U.S. examples. 

The State Department is also involved in interagency coordination on 
trade and public health through the interagency advisory system as well 
as during FTA negotiations, but agency officials stated that trade and 
IP efforts are only one small part of the larger U.S. government effort 
to increase access to medicines. USTR consults with State through the 
formal interagency advisory review process, and State officials are 
included in all discussions of IP chapters in the FTAs. However, the 
agency primarily makes an effort to balance IP rights and access to 
medicines through public health initiatives it coordinates with other 
agencies or administers itself, such as PEPFAR. USAID has extensive 
global health programs and had some involvement in policy discussions 
at the time of the Doha Declaration. The development agency has had 
little or no involvement in such discussions since, however. 

Public Health Representatives Were Recently Added to the Industry Trade 
Advisory Committees: 

In January 2007, public health representatives were added to the two 
technical ITACs most relevant to pharmaceuticals and IP rights-
-the chemicals committee (ITAC-3) and the IP committee (ITAC-15)--where 
multiple brand-name pharmaceutical companies serve. However, by the 
time that USTR and the Department of Commerce had appointed one public 
health representative to each of these two committees, USTR had 
concluded nine FTAs. 

According to Commerce officials, the appointments were prompted by an 
April 2005 request by an NGO for public health perspectives in several 
of the industry trade advisory committees. Within 3 months, Commerce 
and USTR agreed to consider adding public health representatives to the 
industry advisory system, but the appointments were delayed until 
2007.[Footnote 35] Although USTR and Commerce indicated at least one 
public health representative would be appointed to both the IP 
committee and the chemicals committee in December 2005, a coalition of 
NGOs filed a lawsuit against USTR during the same month for public 
health representation on six other ITACs in the trade advisory 
committee system as initially requested in 2005.[Footnote 36] The 
lawsuit is pending an appeal, after an initial ruling dismissing the 
case on the grounds that the court could not find any meaningful 
standards in the Trade Act of 1974 under which it could judge the 
balance of the membership of the trade advisory committees.[Footnote 
37] Due to the ongoing litigation relating to the composition of the 
trade advisory system, we do not make any judgments about the 
appropriateness of a particular committee's composition. 

USTR maintains that representatives in other trade advisory committees 
provided public health input on FTAs. For instance, USTR noted that 
Trade and Environment Policy Advisory Committee (TEPAC) members had 
access to the secure private sector advisory Website, and that some 
groups in that committee had expressed concern about provisions in 
several FTAs. Specifically, some environmental and consumer group NGOs 
on the committee have submitted concerns to USTR in committee reports 
on the FTAs about the impacts certain FTA provisions have on public 
health and access to medicines. In an alternative opinion attached to 
several committee reports, the minority group of TEPAC representatives 
maintained that U.S. FTAs are inconsistent with the Doha Declaration on 
TRIPS and Public Health and that FTA provisions on data exclusivity and 
patent linkage, as well as limitations on the use of compulsory 
licensing, reduce access to medicines. They recommended that Congress 
not approve some FTAs and requested Congress to take their public 
health concerns into account when considering other FTAs. 

There is little evidence that USTR discussed the concerns submitted 
about the public health impact of FTAs with U.S. health agencies or 
other members of the public health community. A member of the TEPAC 
committee also noted that although the environmental advisory committee 
reports provided to USTR include the committee members' recommendations 
or concerns about public health in FTAs, there is little dialogue 
between USTR and committee members on these issues. In the member's 
opinion, this is because the advisory consultations are not integrated 
into the FTA negotiations process, which limits the ability of members 
to advise USTR on the issues that arise during negotiations, including 
public health concerns, as opposed to after a draft has been developed. 
However, USTR notes that the concerns have been raised and discussed by 
the USTR personally during TEPAC meetings. 

The Committees on Which Public Health Representatives Participate Are 
Composed of a Majority of Other Private Sector Industry Stakeholders: 

The two individuals that were appointed as public health 
representatives on the ITACs individually serve on committees that are 
respectively composed of a total of 20 and 33 private sector 
representatives from the pharmaceutical and other industry sectors. 
(See figure 6.) Commerce officials explained that, in selecting among 
the 10 applicants who responded to the Federal Register notice, they 
considered candidates' backgrounds to determine if the candidates 
understood both relevant IP issues and which public health concerns 
would be relevant to the intersection of public health, international 
trade, and IP rights or pharmaceuticals, respectively, as relevant to 
the work of the committees. According to these officials, the selection 
committee also tried to ensure that the representatives would make 
meaningful contributions to the committees and have the weight 
necessary to challenge the committees when necessary. Commerce 
officials did not believe it was necessary to have two public health 
representatives on one committee representing the same view, and they 
said that they did not find any other viable candidates with additional 
perspectives beyond the individuals selected. However, Commerce 
officials stated that the Federal Register notice announcing the 
positions on the ITACs remains open. If additional qualified public 
health candidates applied would contribute another perspective to 
either of these two committees applied, they said the agency would 
consider adding additional public health representation. 

Figure 6: Public Health Representation on Industry Trade Advisory 
Committees: 

This figure is a chart is combination of pie charts showing the public 
health representation on industry trade advisory committee. 

[See PDF for image] 

Source: GAO analysis of USTR documents. 

[End of figure] 

USTR Has Received Public Health Input through Other Formal and Informal 
Means: 

Our review showed that, although USTR has received limited input on 
public health through formal advisory system communications channels, 
it has received public health input through other formal and informal 
processes, including input from the pharmaceutical industry and the 
public health community. Pharmaceutical Research and Manufacturers of 
America (PhRMA), the pharmaceutical industry trade group, has submitted 
annual reports to USTR on industry concerns about IP rights globally 
for the agency to consider in developing its Special 301 report. Both 
pharmaceutical industry representatives and public health community 
members have also provided input on IP rights and public health 
concerns for several FTAs that have been concluded through USTR's 
formal public hearings and the Federal Register comments. In addition, 
USTR has received and responded to congressional correspondence 
regarding members' public health concerns about the impact of FTAs. 
According to USTR officials, while there are some minor modifications 
to FTA texts during each negotiation, the public health community is 
aware of the provisions the United States proposes to be included in 
each agreement, given past FTAs implemented, and may also provide 
public health input through more informal mechanisms. For example, USTR 
has received and responded to some informal input on public health in 
trade negotiations through correspondence with NGOs. Moreover, USTR 
officials noted that they have an open door policy and will meet with 
anyone who requests a meeting, including NGOs, public health 
representatives, and generic industry representatives. Both USTR and 
private sector representatives, including NGOs, have confirmed that 
private sector representatives have provided informal input to USTR on 
public health concerns, in particular FTAs, through phone calls or 
requested meetings. However, input USTR receives through such channels 
may lack the weight of formal private sector input on public health 
issues in trade agreements, such as trade advisory committee reports on 
proposed trade agreements that are transmitted to the administration 
and Congress. 

Conclusions: 

USTR has followed a consistent approach in negotiating, implementing, 
and monitoring its trade agreements under TPA--namely, by protecting 
the minimum standards of IP rights provided in TRIPS and promoting high 
IP standards similar to U.S. law. Other than making concessions on 
compulsory licensing and parallel importation provisions, and on side 
letters that state that the IP chapter does not affect a country's 
ability to take necessary public health measures, USTR has not changed 
its uniformly high demands with regard to IP protection in its FTAs. 
The degree to which USTR's policy has achieved the right balance of IP 
protection and attention to public health, and more specifically 
whether it has respected the Doha Declaration as called for under TPA, 
depends in part on the stakeholder asking the question. This reflects a 
fundamental tension between protecting IP rights in order to allow 
companies to recoup investment and encourage innovation for the long 
term, and allowing competitors to sell lower cost drugs for short term 
public health needs. As Congress contemplates renewal of TPA, there are 
ongoing questions about the overall balance of IP rights and public 
health. 

Matter for Congressional Consideration: 

If Congress disagrees with USTR's interpretation and implementation of 
TPA guidance with regard to IP rights and public health, it should 
specify more clearly its intentions for U.S. trade policy and public 
health policy input related to balancing public health concerns and the 
negotiation of IP rights in trade agreements. 

Agency Comments and Our Evaluation: 

We provided the U.S. Trade Representative; the Secretaries of the 
Departments of Commerce, Health and Human Services, and State; the 
Administrator of the U.S. Agency for International Development; and the 
Under Secretary of Commerce for Intellectual Property and Director of 
the United States Patent and Trademark Office with a draft of this 
report. The U.S. Trade Representative; the Secretaries of the 
Departments of Commerce, Health and Human Services, and State; and the 
Administrator of the U.S. Agency for International Development chose to 
provide technical comments. We modified the report where appropriate. 

As agreed with your offices, unless you publicly announce the contents 
of this report earlier, we plan no further distribution of it until 30 
days from the date of this letter. At that time, we will send copies of 
this report to the U.S. Trade Representative; the Secretaries of the 
Departments of Commerce, Health and Human Services, and State; the 
Administrator of the U.S. Agency for International Development; and the 
Under Secretary of Commerce for Intellectual Property and Director of 
the United States Patent and Trademark Office. We also will make copies 
available to others upon request. In addition, the report will be 
available at no charge on the GAO Web site at [hyperlink, 
http://www.gao.gov]. 

If you or your staff has any questions concerning this report, please 
contact me at (202) 512-4128 or at yagerl@gao.gov. Contact points for 
our Offices of Congressional Relations and Public Affairs may be found 
on the last page of this report. GAO staff members who made major 
contributions to this report are listed in appendix IV. 

Sincerely yours, 

Signed by:  

Loren Yager: 

Director, International Affairs and Trade: 

[End of section] 

Appendix I: :cope and Methodology: 

To evaluate how the U.S. has interpreted the intent and meaning of the 
Doha Declaration, we performed document reviews on agency documentation 
and correspondence as well as WTO documents, and conducted interviews. 
We also reviewed academic studies, pharmaceutical industry reports, 
position papers, and media reports. Specifically, we examined relevant 
WTO legal documents, including the declaration on TRIPS and Public 
Health; the 2003 General Council Chairperson's statement; the August 
30, 2003, General Council Decision on the Implementation of Paragraph 6 
of the Doha Declaration on TRIPS and Public Health; the December 6, 
2005, General Council Decision on the Amendment of TRIPS; and relevant 
articles of the TRIPS agreement. We reviewed WTO TRIPS Council minutes 
and other official documents, reviewed USTR official documents, 
interviewed USTR officials in Washington and Geneva, and interviewed 
WTO officials and WTO country representatives in Geneva. 

To investigate how the United States negotiates and oversees 
implementation of IP provisions related to pharmaceuticals in its trade 
agreements, we interviewed USTR officials, reviewed agency documents, 
and examined the text of the FTAs negotiated since the Trade Act of 
2002. We spoke to USTR officials about their views on the three IP 
negotiating objectives in TPA and their overall approach for pursuing 
these objectives. Specifically, we learned about the pharmaceutical 
provisions pursued by USTR in the IP chapter of its FTAs, and how the 
pursuit of these provisions relates to their negotiating approach. We 
also reviewed agency documentation of negotiating policy, draft texts 
of FTAs, and other types of documentation in order to further examine 
the IP negotiating policy pursued by USTR. In order to analyze the 
patterns and results of USTR's stated approach, we reviewed the text of 
each of the 11 FTAs negotiated under TPA. We evaluated the 
pharmaceutical-related IP provisions in each agreement and catalogued 
which related provisions were present in the final text of each 
agreement. Using this information, we were able to identify patterns 
and thereby confirm USTR's stated policy regarding the pursuit of these 
provisions. We did not assess the reliability of the per capita income 
data contained in figure 2 because we are providing them as background 
information only. 

In addition, we interviewed officials from Department of State, 
Department of Health and Human Services (HHS), Department of Commerce, 
the Patent and Trademark Office (PTO), and the U.S. Agency for 
International Development (USAID) in order to obtain their perspectives 
on the pharmaceutical provisions pursued in the FTAs. We performed 
literature reviews of articles and studies documenting the multiple 
opinions regarding these provisions pursued by USTR. From this 
literature review and from agency meetings, we identified numerous 
stakeholders and experts to speak with, including pharmaceutical 
industry representatives, public health groups, NGOs, academics, and IP 
experts. These groups include Pharmaceutical Research and Manufacturers 
of America (PhRMA), Generic Pharmaceutical Association, (GPhA), The 
International Federation of Pharmaceutical Manufacturers & Associations 
(IFPMA), Oxfam, Doctors without Borders (MSF), Essential Information, 
Consumer Project on Technology,[Footnote 38] Health Global Access 
Project (GAP), Health Action International, Center for Policy Analysis 
on Trade and Health (CPATH), Access to Drugs Initiative (ADI), Third 
World Network, Center for International Environmental Law (CIEL), 
International Center for Trade and Sustainable Development (ICTSD), 
Drugs for Neglected Diseases Initiative (DNDI), as well as three 
academics, two intellectual property lawyers, and three public health 
experts specializing in this area. We interviewed these stakeholders 
and experts in order to gather a complete perspective on USTR's 
negotiating strategy and the pharmaceutical-related IP provisions 
present in the FTAs. We also traveled to Geneva, Switzerland, to meet 
with officials from the U.S. Mission in Geneva; World Trade 
Organization (WTO); World Health Organization (WHO); World Intellectual 
Property Organization; The Joint United Nations Program on HIV/AIDS; 
United Nations Development Program; the Global Fund to Fight AIDS, 
Tuberculosis and Malaria, as well as NGOs from the pharmaceutical 
sector and public health community. 

In order to examine how USTR implements and oversees its trade 
agreements, we interviewed USTR officials, reviewed agency 
documentation, and analyzed USTR's annual Special 301 reports. We spoke 
to USTR officials and reviewed agency documentation about their 
approach to implementing and overseeing its trade agreements. In 
addition, we examined trends and patterns of citations found in USTR's 
annual Special 301 reports in order to analyze how USTR oversees its 
trade agreements with respect to IP provisions related to 
pharmaceuticals. We reviewed each Special 301 report from 2000 to 2007 
in order to identify every mention of a pharmaceutical-related issue 
for all countries listed on the priority watch list,[Footnote 39] the 
watch list,[Footnote 40] and the Section 306 list[Footnote 41]. For 
each country listed in the report in every given year, we noted whether 
the report mentioned anything related to a pharmaceutical issue or 
concern. We reviewed the reports using decision rules we developed to 
identify the most frequently discussed pharmaceutical issues in Special 
301 reports over this period. To enhance the accuracy and soundness of 
our review, two GAO staff members conducted independent reviews of the 
reports. These staff members had a high degree of concurrence in the 
pharmaceutical issues they identified and were able to reconcile the 
instances where they differed initially. We also interviewed USTR 
officials about some of the factors considered during the Special 301 
process in order to determine limitations to our analysis. Limitations 
to our analysis include the inherent selection bias in the USTR 
reports, since the Special 301 report does not capture each IP concern 
in every country. Also, there are numerous factors governing a 
country's inclusion, but USTR generally focuses on countries with 
relatively higher levels of development. The analysis is also limited 
to only pharmaceutical-related issues raised in the Special 301 report 
over this period and does not capture the weight of each concern. In 
addition, pharmaceutical counterfeiting may be undercounted in this 
analysis due to the fact that it may be subsumed into more general 
references to trademark counterfeiting and inadequate enforcement. We 
also obtained and compared the input provided to USTR by U.S. embassies 
and the pharmaceutical industry. Additionally, we spoke to USTR 
officials about the factors taken into account for the 2007 Special 301 
report, specifically regarding the decision of Thailand and Brazil to 
issue compulsory licenses on pharmaceutical products. 

To investigate how USTR assists other countries in implementing FTAs 
and TRIPS obligations, we interviewed agencies involved in providing 
technical assistance to FTA partner and nonpartner countries, including 
USTR, HHS, PTO, and USAID. We spoke with agency officials about the 
type of technical assistance they provide on the FTAs, Doha Declaration 
flexibilities, and public health and about the audience receiving the 
assistance. We also reviewed technical assistance and training-related 
documents and correspondence to corroborate the testimonial evidence. 

In order to evaluate the extent of formal and informal IP and public 
health input into USTR's trade agreement negotiations, we examined the 
formal interagency advisory process, the formal industry advisory 
committee process, and several informal means for providing input to 
USTR. To examine the level of interagency consultation on trade, IP, 
and public health issues between USTR and the Department of State, HHS, 
Department of Commerce, PTO, and USAID, we reviewed documentation of 
interagency discussions related to the TRIPS Doha Declaration and FTAs. 
Limited documentation was available. We also interviewed USTR, 
Commerce, HHS, State, PTO, and USAID officials about their roles in the 
interagency advisory process and the public health input they provided 
or received during WTO discussions on the TRIPS and Public Health 
Declaration and during FTA negotiations. 

To evaluate the type and extent of public health input USTR received 
through the industry trade advisory process, we reviewed industry 
advisory committee reports for the IP and chemicals committees, as well 
as the trade and environment committee. We also evaluated the 
membership of the IP and chemicals industry advisory committees to 
determine the composition of industries and interests represented. 
However, we did not make any judgments about the appropriateness of any 
particular committee's composition. In addition, to better understand 
the selection and appointment process for the public health 
representatives on the IP and chemicals industry advisory committees, 
we interviewed USTR, Commerce, and HHS officials and reviewed 
documentation related to the representatives' appointments. We also 
spoke with the primary NGO involved in the initial request for public 
health representation on the industry advisory committees, as well as 
several other NGO and academic members of the public health community, 
about their views on the public health representative appointments. 
Moreover, we interviewed selected members of the trade and environment 
committee, to obtain perspectives on the advisory process and public 
health input provided to USTR through it. Furthermore, we reviewed 
records of USTR's public hearings on FTAs, Federal Register notice 
comments, and congressional and private sector correspondence with USTR 
on the FTAs and the issues of IP rights and public health. We also 
spoke with several NGOs about public health input they provided to USTR 
through meetings and phone calls. 

[End of section] 

Appendix II: Technical Assistance on IP Rights and Public Health: 

Technical assistance on IP rights and public health to FTA partner and 
nonpartner governments has been limited and provided mostly upon host 
country request. According to USTR officials, U.S. negotiators review 
each FTA provision in the text with the signatories, at which time they 
may also ask for technical assistance. Also, FTA partner countries 
always have the option of requesting trade-capacity building assistance 
from the United States at the conclusion of negotiations. However, USTR 
has never had a request for TCB on the Doha Declaration, and only on IP 
matters related to enforcement. USTR does not initiate technical 
assistance on FTA provisions and the use of TRIPS flexibilities, but 
responds to country requests, which it forwards to the appropriate 
agency. U.S. agencies tend to provide technical advice to FTA partner 
governments on regulatory issues, rather than public health issues. For 
example, the FDA has provided technical assistance to partner countries 
in developing implementing regulatory measures. Similarly, technical 
assistance activities conducted by USAID and PTO include conferences, 
workshops, capacity-building cooperation agreements, and patent program 
certificate programs on topics such as international IP standards in 
TRIPS, drafting trade reform legislation, and enforcement of IP rights. 
Specific IP issues discussed include data exclusivity, patent 
extensions, and implications of FTA IP rights commitments. 

According to USAID officials, USAID can provide technical assistance if 
the host country has requested assistance in a particular area. 
Although FTAs have helped promote training in the area of intellectual 
property and public health, the agency has not done much work on those 
topics. USAID officials said that most training occurs during FTA 
negotiations, but FTA partner countries often receive the training from 
WTO or another third party in order to gain a more objective training 
or perspective than they believe they would receive from the United 
States. Similarly, according to PTO officials, most requested PTO 
training is with respect to FTA agreements and primarily focuses on the 
implementation and enforcement of FTA provisions, and the audience is 
generally patent examiners conducting enforcement activities. The PTO 
Global IP Academy, established in 2005, is another example of PTO's 
technical assistance on IP matters to other countries, whereby PTO 
trains foreign officials on IP enforcement. The agency also advises 
countries on drafting implementing legislation and the development of 
compliance regulations. 

Agencies also provide general technical assistance to countries on 
TRIPS obligations. For example, Commerce's Commercial Law Development 
Program, which receives some funding from USAID, has provided training 
to Pakistan on TRIPS and the role of U.S. agencies in domestic patent 
and data protection. However, according to USTR, most requests related 
to TRIPS IP issues fall in nonpharmaceutical IP areas, such as 
trademark registration, enhancing patent processing, or enforcement 
capacity. PTO officials stated that they offered a course on 
biotechnology that covered all aspects of patent, copyright, and 
trademark WTO provisions. The State Department has also provides a 
standard training on IP rights to U.S. Foreign Service Officers through 
the Foreign Service Institute (FSI), which includes basic information 
on patents, data protection, and other U.S. and TRIPS IP provisions. 
The training also provides an overview of the Doha Declaration and 
TRIPS flexibilities, including the use of compulsory licenses, as well 
as a summary of the U.S. government's objectives for access to 
medicines. 

While there has been no proactive agency effort to assist countries in 
using the Doha Declaration TRIPS flexibilities, agencies have developed 
and provided some information upon request. USAID has worked closely 
with USTR to develop such U.S.-sponsored training that is TRIPS 
compliant and has recently added discussion about the Doha Declaration 
and the implementation of compulsory licensing into training on the use 
of TRIPS flexibilities. For instance, USAID funded a presentation in 
Lebanon on TRIPS implementation in response to requests for assistance 
with its WTO accession. In addition, USAID technical assistance 
projects were implemented in Egypt related to IP rights and public 
health, including a conference on IP and pharmaceuticals that covered 
TRIPS, the Doha Declaration, compulsory licensing, and data 
exclusivity, under the auspices of the prime minister and minister of 
health. Similarly, USAID presented in Uganda a workshop on Developments 
at Doha, including TRIPS and public health, as part of assistance 
taking place in December 2001 and January - February 2002. USTR stated 
that Honduras also conferred with the United States about how to use 
the paragraph six waiver to issue a compulsory license, but the drug 
was not under patent and training was ultimately not necessary. PTO has 
also conducted training on relevant IP provisions, including on U.S. 
laws and regulations related to data exclusivity and patent linkage, in 
response to country requests. PTO officials emphasized, however, that 
it is not PTO's role to ensure that these countries implement the 
provisions in the same manner as the United States. In fact, PTO makes 
an effort to understand the country's legal context and capacity so 
that its advice is appropriate to its circumstances. 

In addition, U.S. agencies offer some assistance related to technology 
transfer, which is referred to in paragraph seven of the Doha 
Declaration on TRIPS and Public Health. For example, HHS provides 
significant assistance to developing countries though its technology 
transfer activities. The National Institutes of Health (NIH) has 
developed innovative programs to improve how technologies are 
transferred to developing countries, particularly by identifying those 
biomedical research companies and institutions that have the interest 
and capacity to receive and develop new biomedical products. According 
to HHS officials, NIH has one of the largest biomedical technology 
transfer offices in the world. NIH's Office of Technology Transfer 
(OTT) has successfully transferred technologies, mostly for infectious 
disease diagnosis, treatment and prevention, to institutions in 
developing countries such as India, Mexico, Brazil, China, Egypt, and 
South Africa and currently is working with institutions in other 
developing countries. NIH OTT has also initiated a limited 
international technology transfer capacity building program to train 
scientists and managers from institutions in developing countries about 
intellectual property management and other technology transfer-related 
matters. Similarly, USAID is involved in some technology transfer 
assistance. According to agency officials, USAID recently established a 
technology transfer program in Columbia to assist the local generic 
industry. 

[End of section] 

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Loren Yager (202) 512-4128: 

Staff Acknowledgments: 

Kim Frankena, Assistant Director; Nina Pfeiffer; Diana Blumenfeld; 
Suneeti Shah; Yesook Merrill; and Grace Lui made significant 
contributions to this report. Martin De Alteriis, Karen Deans, and 
Etana Finkler also provided assistance. 

[End of section] 

Footnotes: 

[1] Trade Act of 2002, Pub. L. No. 107-210, § 2102, 116 Stat. 933, 995- 
996 (codified at 19 U.S.C. § 3802). 

[2] 19 U.S.C. §§ 2152, 2155. 

[3] Nevertheless, critics have questioned IP rights' contributions to 
innovation. A November 2006 GAO study found that new drug applications 
submitted by pharmaceutical companies to the FDA had increased at a 
much slower pace than R&D expenditures, and that many of these were for 
new uses of existing compounds, rather than for completely new drugs. 
IP rights were among the factors some experts cited as slowing drug 
development. See GAO, New Drug Development: Science, Business, 
Regulatory, and Intellectual Property Issues Cited as Hampering Drug 
Development Efforts, GAO-07-49 (Washington, D.C.: Nov. 17, 2006). 

[4] 35 U.S.C. § 154. 

[5] Pub. L. No. 98-417, 98 Stat. 1585. 

[6] 21 U.S.C. § 355. 

[7] For the purposes of this report, bioequivalent means the generic 
drug has the same rate and extent of absorption and delivers the same 
amount of active ingredients into a patient's bloodstream in the same 
amount of time as the name-brand patented drug. 

[8] United States Leadership Against HIV/AIDS, Tuberculosis, and 
Malaria Act of 2003, Pub. L. No. 108-25, 117 Stat. 711. 

[9] This compares with Giving USA's estimates that donations by U.S. 
corporations and corporate foundations totaled $12.72 billion in 2006. 
For further information, see "U.S. charitable giving reaches $295.02 
billion in 2006: third straight year of growth," June 27, 2007, press 
release, Giving USA Foundation. [hyperlink, http://www.aafrc.org]. 

[10] According to the WHO, its work on trade, IP rights, and access to 
medicines can be summed up under two headings: (1) monitoring and 
analyzing the pharmaceutical and health implications of international 
trade agreements, and (2) assisting member states in assessing and 
developing pharmaceutical and health policies and regulatory measures 
that maximize the positive and mitigate the negative impact of those 
agreements. In May 2006, WHO established an Intergovernmental Working 
Group on Public Health, Innovation and Intellectual Property with a 
mandate to prepare a global strategy and plan of action on essential 
health research to address conditions affecting developing countries 
disproportionately. A May 2007 resolution, adopted without U.S. 
support, requests WHO "to provide as appropriate, upon request, in 
collaboration with other competent international organizations, 
technical and policy support to countries that intend to make use of 
the flexibilities contained in the agreement on Trade-Related Aspects 
of Intellectual Property Rights and other international agreements in 
order to promote access to pharmaceutical products, and to implement 
the Doha Ministerial Declaration on the TRIPS Agreement and Public 
Health and other WTO instruments." 

[11] TRIPS Agreement, Art. 39.3. 

[12] For the text of these remarks, see Congressional Record, Senate, 
S4322-4324, May 14, 2002. 

[13] Based on paragraph 17, Ministerial Declaration, Fourth Ministerial 
Conference, Doha, Qatar, November 14, 2001. 

[14] See [hyperlink, 
http://www.wto.org/english/tratop_e/trips_e/factsheet_pharm00_e.htm] 

[15] See [hyperlink, 
http://www.wto.org/english/tratop_e/trips_e/actsheet_pharm00_e.htm] 

[16] According to USTR, developed country members were required to 
implement the TRIPS Agreement fully as of January 1, 1996. Developing 
countries were given a transition period for many obligations until 
January 1, 2000. Recognizing the particular challenges faced by least- 
developed countries, in 2005, the United States worked closely with 
them and other WTO members to extend the implementation date for these 
countries from January 2006 to July 2013. The least developed country 
members in turn pledged to preserve the progress that some had made 
toward TRIPs compliance. 

[17] See [hyperlink, 
http://www.wto.org/english/tratop_e/trips_e/factsheet_pharm00_e.htm] 

[18] The term "compulsory licensing" does not appear in the TRIPS 
agreement. However, it does appear in the Paris Convention, and WTO 
members are required to comply with relevant portions of that 
Convention (see TRIPS article 2.1). The phrase "other use without 
authorization of the right holder" appears in the title of TRIPS 
article 31. 

[19] For the purposes of this report, parallel or grey-market imports 
are products marketed by the patent owner or by someone else with the 
patent owner's permission in one country and subsequently imported into 
another country without the approval of the patent owner. For example, 
suppose company A had a drug patented in two countries, Belladonna and 
Calamine, which it sold at a lower price in Calamine. A parallel import 
would occur if a second company B bought the drug in Calamine and 
imported it into Belladonna at a price that was lower than company A's 
price. 

[20] While this deadline has now passed, as a practical matter 
questions still remain about how soon pharmaceuticals produced in India 
will be under patent. For example, generic drugs produced in India or 
anywhere in the world before 2005 would be grandfathered under the old 
system and thus not effectively subject to patents. 

[21] To quote the chairman's statement on the General Council decision 
on the implementation of paragraph 6: "The following Members have 
agreed to opt out of using the system as importers: Australia, Austria, 
Belgium, Canada, Denmark, Finland, France, Germany, Greece, Iceland, 
Ireland, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, 
Portugal, Spain, Sweden, Switzerland, United Kingdom and United States 
of America. Until their accession to the European Union, Czech 
Republic, Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, 
Slovak Republic and Slovenia agree that they would only use the system 
as importers in situations of national emergency or other circumstances 
of extreme urgency. These countries further agree that upon their 
accession to the European Union, they will opt out of using the system 
as importers. Some other Members have agreed that they would only use 
the system as importers in situations of national emergency or other 
circumstances of extreme urgency: Hong Kong (China), Israel, Korea, 
Kuwait, Macao (China), Mexico, Qatar, Singapore, Chinese Taipei, 
Turkey, United Arab Emirates." 

[22] For the purposes of this report, diversion is the importation and 
resale of pharmaceuticals intended for use in another country. A 
typical example might involve pharmaceuticals donated to a relief 
organization in a poorer country that make their way into developed 
nations for sale at a substantial markup. Diversion presents its 
practitioners with opportunities to generate illegitimate profits by 
diverting drugs from their intended recipients whenever pharmaceutical 
companies distribute high value drugs at below market prices. 

[23] 19 U.S.C. §3802. 

[24] See 35 U.S.C. § 156. 

[25] See 21 U.S.C. § 355. 

[26] The side letters on public health generally state that the 
obligations under the IP chapter do not affect a Party's ability to 
take necessary measures to protect public health by promoting access to 
medicines for all, in particular concerning cases such as HIV/AIDS, 
tuberculosis, malaria, and other epidemics as well as circumstances of 
extreme urgency. The side letters also generally state that the 
obligations under the IP chapter do not prevent the effective 
utilization of the TRIPS/health solution. For specific wording, see the 
Colombia, Bahrain, Oman, Morocco, CAFTA-DR, Peru, and Panama free trade 
agreements and associated side letters. 

[27] Not captured in this number are other statements on public health 
in the FTAs such as in the preamble of the Chile FTA IP chapter that 
states, "Recognizing the principles set out in the Declaration on the 
TRIPS Agreement on Public Health, adopted on November 14, 2001, by the 
WTO at the Fourth WTO Ministerial Conference, held in Doha, Qatar." 
According to USTR officials, such a statement is part of the 
interpretive context of an FTA. 

[28] The side letter on public health constitutes a formal 
understanding that forms part of the interpretive context of a 
signed/implemented FTA as described in the Vienna Convention on the Law 
of Treaties, Article 31. 

[29] The Chile, Singapore, Australia, Morocco, Bahrain, CAFTA-DR, Oman, 
and Republic of Korea FTAs state that 5 years of data exclusivity are 
to be provided. The Peru, Colombia, and Panama FTAs will require the 
provision of data exclusivity for a reasonable amount of time and state 
that a reasonable amount of time normally means 5 years. 

[30] The bipartisan trade deal also included agreements and amendments 
on a variety of other areas in these FTAs, including labor standards, 
environmental standards, government procurement, port security, and 
investment. 

[31] See 19 U.S.C. §§ 2242, 2412. Special 301 is a congressionally 
mandated report that requires USTR to identify, within 30 days of the 
submission of the annual National Trade Estimates report, foreign 
countries that (1) deny adequate and effective protection of IP rights 
or fair and equitable market access to U.S. persons that rely on IP 
protection, and (2), of those countries identified in (1), priority 
countries. Priority countries, as defined by law, are countries (1) 
that have the most onerous or egregious acts, policies, or practices 
that deny adequate and effective IP rights with the greatest adverse 
impact on the relevant U.S. goods, and (2) that are not entering into 
good faith negotiations or making significant progress in bilateral or 
multilateral negotiations to provide adequate and effective IP 
protection. In making these identifications, USTR takes into account 
the history of IP laws and practices of the foreign country and the 
history of efforts of the United States, and the response of the 
foreign country, to achieve adequate and effective protection and 
enforcement of IP rights. 

[32] 19 U.S.C. §§ 2152, 2155. 

[33] HHS, USAID, Commerce, and State, among others, participate in 
varied levels of the interagency advisory process through the Trade 
Policy Review Group (TPRG) and the Trade Policy Staff Committee (TPSC), 
in which agency officials may review the texts of FTAs and make 
comments. TPSC and TPRG are administered and chaired by USTR, and the 
groups are composed of 19 executive agencies and offices. The TPSC is 
the primary operating group, with representation at the senior civil 
service level, and if policy agreement is not reached in the TPSC, or 
if significant policy questions are being considered, issues are taken 
up by the TPRG, with representation at the Deputy USTR/Under Secretary 
level. 

[34] During the TRIPS and public health debates at the WTO, USTR 
officials consulted with HHS officials, as well as with State and PTO 
officials, and HHS's Office of Global Health Affairs (OGHA) was very 
involved in developing the U.S. proposals for the paragraph six 
solution. 

[35] Department of Commerce officials cited the Doha negotiations, the 
rechartering of the industry trade advisory committees, and the time 
required to send out notices of position openings, vet applicants, and 
obtain security clearances. 

[36] Ctr. for Policy Analysis on Trade and Health (CPATH) v. Office of 
the United States Trade Representative, No. 05-05177 MJJ (N.D.Cal. June 
30, 2006), appeal docket, No. 06-16682 (9th Cir. Sept. 14, 2006). The 
industry advisory committees cited in the lawsuit are ITAC-4 (Consumer 
Goods), ITAC-5 (Distribution Services), ITAC-8 (Information and 
Communications Technologies, Services and Electronic Commerce), ITAC- 
10 (Services and Finance Industries), ITAC-14 (Customs Matters and 
Trade Facilitation) and ITAC-16 (Standards and Technical Trade 
Barriers). 

[37] Pursuant to Federal Advisory Committee Act, an advisory 
committee's membership must be "fairly balanced in terms of the points 
of view represented and the functions to be performed by the advisory 
committee." 5 U.S.C. App. 2 § 5. 

[38] Name recently changed to Knowledge Ecology International. 

[39] Countries that have the most onerous or egregious acts, policies, 
or practices and whose acts, policies, or practices have the greatest 
adverse impact (actual or potential) on the relevant U.S. products must 
be designated as "Priority Foreign Countries." Countries placed on the 
Priority Watch List are the focus of increased bilateral attention 
concerning the problem areas. 

[40] Placement of a trading partner on the Priority Watch List or Watch 
List indicates that particular problems exist in that country with 
respect to IP rights protection, enforcement, or market access for 
persons relying on intellectual property (IP). 

[41] Any country that was previously designated a Priority Foreign 
Country but entered into good-faith negotiations and/or is making 
progress is placed under Section 306 monitoring. Under Section 306, 
USTR monitors a country's compliance with bilateral IP agreements that 
are the basis for resolving an investigation under Section 301. 

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